Financial integration, contagion and policy implications

Augusto Hasman and Margarita Samartín

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: This theoretical paper presents a novel perspective on the trade-off between capital requirements and the role of a lender of last resort. Banks can decide to establish interconnections with other financial institutions in the presence of shocks on the asset and liability side of their balance sheet. We find that there are four determinants driving the optimal policy, such as the estimated probability of shocks, monitoring costs, the social cost of insurance, and the level of impatience. The role of financial integration is especially likely to be ambiguous from a social perspective.

Keywords: Capital requirements; Lender of last resort; Monitoring effort; Systemic risk (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S105905602500317X
Full text for ScienceDirect subscribers only

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:eee:reveco:v:102:y:2025:i:c:s105905602500317x

DOI: 10.1016/j.iref.2025.104154

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().