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Simulation of financial contagion effect using the NetLogo software at the level of the banking network

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  • Ionuț NICA

    (Bucharest University of Economic Studies, Romania)

Abstract

The complexity of current financial systems around the world makes it difficult to create indicators that accurately assess the systemic risk of any institution. One of the most important issues that has been highlighted in recent years has been the interconnection of banks in the financial network. This led to an increase in the likelihood of contagion, a scenario in which small shocks, which initially impacted only a part of the institutions in the system, spread across the network. Thus, this paper studies the effects of financial contagion that can be transmitted in a banking network, simulating the spread of this effect with the help of the NetLogo IT solution. In recent years, banking accidents have led to a significant disruption of the financial system around the world. Even the COVID-19 pandemic can represent a systemic shock in the banking network and not only and an ascending evolution of the pandemic will be able to create a financial contagion effect at the level of banking institutions.

Suggested Citation

  • Ionuț NICA, 2020. "Simulation of financial contagion effect using the NetLogo software at the level of the banking network," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(624), A), pages 55-74, Autumn.
    • Handle: RePEc:agr:journl:v:3(624):y:2020:i:3(624):p:55-74
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    References listed on IDEAS

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    1. Gai, Prasanna & Kapadia, Sujit, 2010. "Contagion in financial networks," Bank of England working papers 383, Bank of England.
    2. Michael Chui & Simon Hall & Ashley Taylor, 2004. "Crisis spillovers in emerging market economies: interlinkages, vulnerabilities and investor behaviour," Bank of England working papers 212, Bank of England.
    3. Nora CHIRIȚĂ & Ionuț NICA, 2020. "An approach to measuring credit risk in a banking institution from Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(623), S), pages 65-78, Summer.
    4. Mr. Paul R Masson, 1998. "Contagion: Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 1998/142, International Monetary Fund.
    5. Ionuț NICA & Nora CHIRIȚĂ, 2020. "Conceptual dimensions regarding the financial contagion and the correlation with the stock market in Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(622), S), pages 75-86, Spring.
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    Cited by:

    1. Nora CHIRIȚĂ & Camelia DELCEA & Ionuț NICA & Simona-Liliana CRĂCIUNESCU (PARAMON) & Ștefan-Andrei IONESCU, 2023. "Financial contagion and identifying speculative frenzies: Unraveling price bubbles in cryptocurrency markets," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(636), A), pages 21-40, Autumn.
    2. Ionuț Nica & Daniela Blană Alexandru & Simona Liliana Paramon Crăciunescu & Ștefan Ionescu, 2021. "Automated Valuation Modelling: Analysing Mortgage Behavioural Life Profile Models Using Machine Learning Techniques," Sustainability, MDPI, vol. 13(9), pages 1-27, May.

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