Uncertainty in an Interconnected Financial System, Contagion, and Market Freezes

Mei Li, Frank Milne and Junfeng Qiu ()

No 274633, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: This paper studies contagion and market freezes caused by uncertainty in financial network structures and provides theoretical guidance for central banks. We establish a formal model to demonstrate that, in a financial system where financial institutions are interconnected, a negative shock to an individual financial institution could spread to other institutions, causing market freezes because of creditors’ uncertainty about the financial network structure. Central bank policies to alleviate market freezes and contagion, such as information policy, bailout policy and the lender of last resort policy, are examined.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 52
Date: 2013-05
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/274633/files/qed_wp_1308.pdf (application/pdf)

Related works:
Journal Article: Uncertainty in an Interconnected Financial System, Contagion, and Market Freezes (2016)
Working Paper: Uncertainty In An Interconnected Financial System, Contagion, And Market Freezes (2013)
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:ags:quedwp:274633

DOI: 10.22004/ag.econ.274633

Access Statistics for this paper

More papers in Queen's Economics Department Working Papers from Queen's University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().