Contagious Defaults in Interbank Networks
Year: 2022 Volume: 72 Issue: 2 Pages: 104-123
Abstract: This paper investigates systemic risk and contagion processes in an interbank network using network science methods. The interbank network is studied to understand the contagion process within a network considering differences in the network structure and the characteristics of components. Simulations support the claim that heterogeneous networks are more resilient to contagious shocks, while these shocks are more problematic in homogeneous networks. This paper also shows that more interconnections among banks could accelerate or block the contagion process, depending on the structure of the network and the seniority of debts in the interbank network.
JEL classification: G01, G21, G33, D85
Keywords: complex networks, interbank network, systemic risk, default risk, epidemic modeling
DOI: https://doi.org/10.32065/CJEF.2022.02.01
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