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Addressing Interconnectedness: Concepts and Prudential Tools

  • Nicolas Arregui
  • Mohamed Norat
  • Antonio Pancorbo
  • Jodi G. Scarlata
  • Eija Holttinen
  • Fabiana Melo
  • Jay Surti
  • Christopher Wilson
  • Rodolfo Wehrhahn
  • Mamoru Yanase
Registered author(s):

    This paper reviews tools used to identify and measure interconnectedness and raises the awareness of policymakers as to potential cross-sectional implications of prudential tools aimed at controlling interconnectedness. The paper examines two sets of tools—developed at the IMF and externally—to identify the implications of interconnectedness in systemic risk and how these tools have been applied in IMF surveillance. The paper then proposes a preliminary framework to analyze some key internationally-agreed-upon and national prudential tools and finds that while many prudential tools are effective in reducing interconnectedness, the interaction among these tools is far less clear cut.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/199.

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    Length: 58
    Date of creation: 26 Sep 2013
    Date of revision:
    Handle: RePEc:imf:imfwpa:13/199
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    1. Andreas A. Jobst & Dale F. Gray, 2013. "Systemic Contingent Claims Analysis: Estimating Market-Implied Systemic Risk," IMF Working Papers 13/54, International Monetary Fund.
    2. Helmut Elsinger & Alfred Lehar & Martin Summer, 2002. "Risk Assessment for Banking Systems," Working Papers 79, Oesterreichische Nationalbank (Austrian Central Bank).
    3. Marco A. Espinosa-Vega & Juan Solé, 2011. "Cross-border financial surveillance: a network perspective," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(3), pages 182-205, August.
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    5. Ben Craig & Goetz von Peter, 2010. "Interbank tiering and money center banks," BIS Working Papers 322, Bank for International Settlements.
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    8. Sheri M. Markose, 2012. "Systemic Risk from Global Financial Derivatives: A Network Analysis of Contagion and Its Mitigation with Super-Spreader Tax," IMF Working Papers 12/282, International Monetary Fund.
    9. Upper, Christian & Worms, Andreas, 2004. "Estimating bilateral exposures in the German interbank market: Is there a danger of contagion?," European Economic Review, Elsevier, vol. 48(4), pages 827-849, August.
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    13. Iman van Lelyveld & Franka Liedorp, 2006. "Interbank Contagion in the Dutch Banking Sector: A Sensitivity Analysis," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
    14. International Monetary Fund, 2011. "Financial Linkages Across Korean Banks," IMF Working Papers 11/201, International Monetary Fund.
    15. Larry Eisenberg & Thomas H. Noe, 2001. "Systemic Risk in Financial Systems," Management Science, INFORMS, vol. 47(2), pages 236-249, February.
    16. Yulia Makarova & Anna Ilyina & Christian Schmieder & Eugenio Cerutti, 2010. "Bankers without Borders? Implications of Ring-Fencing for European Cross-Border Banks," IMF Working Papers 10/247, International Monetary Fund.
    17. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
    18. Thierry Tressel, 2010. "Financial Contagion Through Bank Deleveraging: Stylized Facts and Simulations Applied to the Financial Crisis," IMF Working Papers 10/236, International Monetary Fund.
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