Funding Shocks through Cross-border Banking in Asia A Network-based Approach

Estelle Xue Liu () and Zijun Liu ()
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Estelle Xue Liu: IMF
Zijun Liu: HKMA

No GRU_2018_019, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

Abstract: In recognition of the potential risk arising from the rapidly increasing cross-border interbank funding in Asia, we examine the contagion of funding shocks through the regional interbank network. We find that the breadth and the final impact of the shock crucially hinge on the magnitude of the shock, initial liquidity buffers and the structure of the interbank network. Liquidity hoarding during financial distress aggravates the severity of the shock, while the interconnectedness of the interbank network may either aggravate or mitigate the shock depending on the size of the shock.

Keywords: funding runs; interbank; network analysis; financial crisis; liquidity ratio; Asia (search for similar items in EconPapers)
JEL-codes: G18 G21 L14 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2018-07-05
New Economics Papers: this item is included in nep-ifn, nep-sea and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2018_019

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