PlumX Metrics
SSRN
Embed PlumX Metrics

Financial Networks and Contagion

SSRN Electronic Journal
2014
  • 308
    Citations
  • 24,288
    Usage
  • 120
    Captures
  • 1
    Mentions
  • 14
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    308
    • Citation Indexes
      308
  • Usage
    24,288
    • Abstract Views
      19,460
    • Downloads
      4,828
  • Captures
    120
    • Readers
      119
    • Exports-Saves
      1
      • SSRN
        1
  • Mentions
    1
    • References
      1
      • Wikipedia
        1
  • Social Media
    14
    • Shares, Likes & Comments
      14
      • Facebook
        14
  • Ratings
    • Download Rank
      3,942

Article Description

We model contagions and cascades of failures among organizations linked through a network of financial interdependencies. We identify how the network propagates discontinuous changes in asset values triggered by failures (e.g., bankruptcies, defaults, and other insolvencies) and use that to study the consequences of integration (each organization becoming more dependent on its counterparties) and diversification (each organization interacting with a larger number of counterparties). Integration and diversification have different, nonmonotonic effects on the extent of cascades. Initial increases in diversification connect the network which permits cascades to propagate further, but eventually, more diversification makes contagion between any pair of organizations less likely as they become less dependent on each other. Integration also faces tradeoffs: increased dependence on other organizations versus less sensitivity to own investments. Finally, we illustrate some aspects of the model with data on European debt cross-holdings.

Bibliographic Details

Matthew Elliott; Benjamin Golub; Matthew O. Jackson

Elsevier BV

financial networks; networks; contagion; cascades; financial crises; bankruptcy; diversification; integration; globalization

Provide Feedback

Have ideas for a new metric? Would you like to see something else here?Let us know