The Asymmetric Effect of Diffusion Processes: Risk Sharing and Contagion

Mauro Gallegati, Bruce Greenwald, Matteo Richiardi and Joseph Stiglitz

No 71, LABORatorio R. Revelli Working Papers Series from LABORatorio R. Revelli, Centre for Employment Studies

Abstract: We provide a general characterization of diffusion processes, allowing to analyze both risk-sharing and contagion at the same time. We show that interdependencies are beneficial when the economic environment is favorable, and detrimental when the economic environment deteriorates. The risk of contagion increases the volatility of outcome and thus reduces the ability of the network to provide risk-sharing.

Keywords: Risk-sharing; Contagion; Networks. (search for similar items in EconPapers)
JEL-codes: D85 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (5)

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Journal Article: The Asymmetric Effect of Diffusion Processes: Risk Sharing and Contagion (2008)
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