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Markets connectivity and financial contagion

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  • Ruggero GRILLI

    ()
    (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

  • Gabriele TEDESCHI

    ()
    (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

  • Mauro GALLEGATI

    ()
    (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

Abstract

In this paper we investigate the sources of instability in credit and financial systems and the effect of credit linkages on the macroeconomic activity. By developing an agent-based model, we analyze the evolving dynamics of the economy as a complex, adaptive and interactive system, which allows us to explain some key elements occurred during the recent economic and financial crisis. In particular, we study the repercussions of inter-bank connectivity on agents' performances, bankruptcy waves and business cycle fluctuations. Interbank linkages, in fact, let participants share risk but also creates a potential for one bank's crisis to spread through the network. The purpose of the model is, therefore, to build up the dependence among agents at the micro-level and to estimate their impact on the macro stability.

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Bibliographic Info

Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 382.

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Length: 22
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:anc:wpaper:382

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Keywords: Systemic risk; business cycle; giant component; network connectivity; volatility;

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References

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Cited by:
  1. Giulia Iori & Rosario N. Mantegna & Luca Marotta & Salvatore Micciche' & James Porter & Michele Tumminello, 2014. "Networked relationships in the e-MID Interbank market: A trading model with memory," Papers 1403.3638, arXiv.org.
  2. Eralba CELA & Tineke FOKKEMA & Elena AMBROSETTI, 2012. "Links Between Transnationalism Integration and Duration of Residence: The Case of eastern European Migrants in Italy," Working Papers 386, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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