The effect of the interbank network structure on contagion and common shocks

Co-Pierre Georg ()

No 2011,12, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: This paper proposes a dynamic multi-agent model of a banking system with central bank. Banks optimize a portfolio of risky investments and riskless excess reserves according to their risk, return, and liquidity preferences. They are linked via interbank loans and face stochastic deposit supply. Evidence is provided that the central bank stabilizes interbank markets in the short-run only. Comparing different interbank network structures, it is shown that money-center networks are more stable than random networks. Systemic risk via contagion is compared to common shocks and it is shown that both forms of systemic risk require different optimal policy responses.

Keywords: systemic risk; contagion; common shocks; multi-agent simulations (search for similar items in EconPapers)
JEL-codes: C63 E52 G01 G21 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cmp, nep-mon and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/52134/1/671536869.pdf (application/pdf)

Related works:
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:zbw:bubdp2:201112

Access Statistics for this paper

More papers in Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().