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Size effect in transitional dynamics of the banking network

Alfredo Daniel Garcia and Martin Andres Szybisz

MPRA Paper from University Library of Munich, Germany

Abstract: We consider a developed economy banking system, that, when surpass certain size, may destabilize and even enter in chaos. Taking Deposits (D_t), Reserves (R_t), Loans (L_t), the ratio of (R_t) to (D_t) and a parameter γ that weights endogenously the system memory, we analyse stability and the possibility of chaos. Using data for the U.S. between 1960 and 2012 we found that a maximum instability state is verified in 2008 when the crisis hits the U.S. banking system core carrying to a public bailout. A larger system does not necessarily lead to robustness but can expand to greater fragility. A proposed banking system stability indicator is also analysed.

Keywords: Banking System; Financial Crises; Instability; Systemic Risk (search for similar items in EconPapers)
JEL-codes: G01 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban
Date: 2017-06-15
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