Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial integration and systemic risk

Contents:

Author Info

  • Fecht, Falko
  • Grüner, Hans Peter

Abstract

Recent empirical studies criticize the sluggish financial integration in the euro area and find that only interbank money markets are fully integrated so far. This paper studies the optimal regional and/or sectoral integration of financial systems given that integration is restricted to the interbank market. Based on Allen and Gale (2000)'s seminal analysis of financial contagion we derive the interbank market structure that maximizes consumers' ex-ante expected utility, i.e. that optimizes the trade-off between the contagion and the diversification effect. We analyze the impact of various structural parameters including the underlying stochastic structure on this trade-off. In addition we derive the efficient design of the interbank market that allows for a cross-regional risk sharing between banks. We also provide a measure for the efficiency losses that result if financial integration is limited to an integration of the interbank market. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/19744/1/200511dkp_b.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2005,11.

as in new window
Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:zbw:bubdp2:4266

Contact details of provider:
Postal: Postfach 10 06 02, 60006 Frankfurt
Phone: 0 69 / 95 66 - 34 55
Fax: 0 69 / 95 66 30 77
Email:
Web page: http://www.bundesbank.de/
More information through EDIRC

Related research

Keywords: Interbank Market; Risk Sharing; Financial Contagion; Financial Integration;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Falko Fecht & Kevin Huang, 2004. "Financial intermediaries, markets, and growth," Econometric Society 2004 North American Summer Meetings, Econometric Society 419, Econometric Society.
  2. John Y. Campbell & Jens Hilscher & Jan Szilagyi, 2005. "In Searach of Distress Risk," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 2081, Harvard - Institute of Economic Research.
  3. Franklin Allen & Douglas Gale, 1998. "Financial Contagion Journal of Political Economy," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 98-31, Wharton School Center for Financial Institutions, University of Pennsylvania.
  4. Koetter, Michael & Bos, Jaap W. B. & Heid, Frank & Kool, Clemens J. M. & Kolari, James W. & Porath, Daniel, 2005. "Accounting for distress in bank mergers," Discussion Paper Series 2: Banking and Financial Studies 2005,09, Deutsche Bundesbank, Research Centre.
  5. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 32(3), pages 611-38, August.
  6. Yaron Leitner, 2005. "Financial Networks: Contagion, Commitment, and Private Sector Bailouts," Journal of Finance, American Finance Association, American Finance Association, vol. 60(6), pages 2925-2953, December.
  7. Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
  8. Hamerle, Alfred & Liebig, Thilo & Scheule, Harald, 2004. "Forecasting Credit Portfolio Risk," Discussion Paper Series 2: Banking and Financial Studies 2004,01, Deutsche Bundesbank, Research Centre.
  9. Hartmann, Philipp & Manna, Michele & Manzanares, Andrés, 2001. "The microstructure of the euro money market," Working Paper Series, European Central Bank 0080, European Central Bank.
  10. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(3), pages 401-19, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Falko Fecht & Hans Grüner, 2008. "Limits to International Banking Consolidation," Open Economies Review, Springer, Springer, vol. 19(5), pages 651-666, November.
  2. Fecht, Falko & Grüner, Hans Peter & Hartmann, Philipp, 2012. "Financial integration, specialization, and systemic risk," Journal of International Economics, Elsevier, Elsevier, vol. 88(1), pages 150-161.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp2:4266. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.