Banks and Their Contagion Potential: How Stable Is Banking System?

Mitja Steinbacher (), Matjaz Steinbacher () and Matej Steinbacher ()
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Matjaz Steinbacher: Kiel Institute for The World Economy
Matej Steinbacher: University of Donja Gorica

A chapter in Artificial Economics and Self Organization, 2014, pp 161-175 from Springer

Abstract: Abstract We measure contagion potential and stability of banking system on a randomized version of the credit contagion model by Steinbacher M, Steinbacher M, Steinbacher M (2012) Credit contagion in financial markets: a network-based approach. Available via SSRN. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2068716 . Cited 30 Jan 2013. We introduce two estimators of the contagion potential of banks (liquidity-loss potential and α-criticality index (Steinbacher M, Steinbacher M, Steinbacher M (2012) Credit contagion in financial markets: a network-based approach. Available via SSRN. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2068716 . Cited 30 Jan 2013)) and introduce Shannon’s entropy as a stability estimator. Our approach is systemic in that it enables an overall estimation of the capacity of the banking system to provide liquidity. Mechanism developed can be employed for measuring systemic risk of banking system as a whole.

Keywords: Banking System; Balance Sheet; Stability Index; Stability Domain; Banking Network (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-319-00912-4_13

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DOI: 10.1007/978-3-319-00912-4_13

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