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Exchange rate shocks in multicurrency interbank markets

Pierre L. Siklos and Martin Stefan

No 9220, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster

Abstract: We develop a framework for studying financial contagion triggered by exchange rate shocks. To this end, we simulate multicurrency interbank markets with stylized properties and study their behavior in response to sudden appreciations and depreciations of a particular currency. A key result of our analysis is that the concentration of many interbank exposures in the same currency can lead to significant systemic risk.

Keywords: Systemic risk; financial contagion; interbank markets; multilayer networks (search for similar items in EconPapers)
Pages: 52 pages
Date: 2020-07
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