Risk amplification effect of multilayer financial networks: Feedback mechanism or cyclic structure?

Congyuan Pang and Hong Fan

Economics Letters, 2024, vol. 242, issue C

Abstract: This paper analyzes the amplification characteristics of risk propagation in multi-layer financial networks from the perspective of network topologies. The research finds that, even without feedback pathways, cross-layer links alone can lead to more severe risk contagion than in single-layer networks. More importantly, with increasing connectivity, the formation of cyclic structures in multi-layer networks will significantly exacerbate the systemic risk.

Keywords: Multilayer financial networks; Systemic risk; Feedback mechanism; Cyclic structure (search for similar items in EconPapers)
JEL-codes: D85 G01 G21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:242:y:2024:i:c:s0165176524003719

DOI: 10.1016/j.econlet.2024.111887

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