CONTAGION RISK IN AN EVOLVING NETWORK MODEL OF BANKING SYSTEMS

Shouwei Li ()
Additional contact information
Shouwei Li: School of Economics and Management, Southeast University, Nanjing 211189, China

Advances in Complex Systems (ACS), 2011, vol. 14, issue 05, 673-690

Abstract: This paper develops an analytical model of contagion risk in banking systems with tiered structure. It explores the respective effects of banking network structure and bank activity on contagion risk in banking network evolution. The findings suggest that increasing interbank connections is conducive to handling banking crisis and reducing the effect of contagion risk, but its positive effect is limited; raising bank reserve ratio will enhance the stability of individual banks to a certain extent, but it may immediately lead to liquidity problems for banks that have less excess reserves, causing the occurrence of contagion risk; an excessive drive for risk assets with high return may bring high risk to banks and lead to instability of banking systems; the bank risk preference is crucial to the stability of banking systems, and the radicalness of it may lead to greater systemic instability.

Keywords: Banking system; contagion risk; tiered structure; network evolution; bank activity (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219525911003438
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:acsxxx:v:14:y:2011:i:05:n:s0219525911003438

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219525911003438

Access Statistics for this article

Advances in Complex Systems (ACS) is currently edited by Frank Schweitzer

More articles in Advances in Complex Systems (ACS) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().