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Financial Contagion Through Bank Deleveraging
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Book Synopsis Financial Contagion Through Bank Deleveraging by : Mr.Thierry Tressel
Download or read book Financial Contagion Through Bank Deleveraging written by Mr.Thierry Tressel and published by International Monetary Fund. This book was released on 2010-10-01 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial crisis has highlighted the importance of various channels of financial contagion across countries. This paper first presents stylized facts of international banking activities during the crisis. It then describes a simple model of financial contagion based on bank balance sheet identities and behavioral assumptions of deleveraging. Cascade effects can be triggered by bank losses or contractions of interbank lending activities. As a result of shocks on assets or on liabilities of banks, a global deleveraging of international banking activities can occur. Simple simulations are presented to illustrate the use of the model and the relative importance of contagion channels, relying on bank losses of advanced countries’ banking systems during the financial crisis to calibrate the shock. The outcome of the simulations is compared with the deleveraging observed during the crisis suggesting that leverage is a major determinant of financial contagion.
Book Synopsis Evolution of the Global Financial Network and Contagion: A New Approach by : Ms.Yevgeniya Korniyenko
Download or read book Evolution of the Global Financial Network and Contagion: A New Approach written by Ms.Yevgeniya Korniyenko and published by International Monetary Fund. This book was released on 2018-05-15 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the interconnectedness of the global financial system and its susceptibility to shocks. A novel multilayer network framework is applied to link debt and equity exposures across countries. Use of this approach—that examines simultaneously multiple channels of transmission and their important higher order effects—shows that ignoring the heterogeneity of financial exposures, and simply aggregating all claims, as often done in other studies, can underestimate the extent and effects of financial contagion.The structure of the global financial network has changed since the global financial crisis, impacted by European bank’s deleveraging and higher corporate debt issuance. Still, we find that the structure of the system and contagion remain similar in that network is highly susceptible to shocks from central countries and those with large financial systems (e.g., the USA and the UK). While, individual European countries (excluding the UK) have relatively low impact on shock propagation, the network is highly susceptible to the shocks from the entire euro area. Another important development is the rising role of the Asian countries and the noticeable increase in network susceptibility to shocks from China and Hong Kong SAR economies.
Book Synopsis Evolution of the Global Financial Network and Contagion by :
Download or read book Evolution of the Global Financial Network and Contagion written by and published by . This book was released on 2018 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Relationship Lending in the Interbank Market and the Price of Liquidity by : Falk Bräuning
Download or read book Relationship Lending in the Interbank Market and the Price of Liquidity written by Falk Bräuning and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions by : Eugenio Cerutti
Download or read book The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions written by Eugenio Cerutti and published by International Monetary Fund. This book was released on 2014-09-25 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: International banks greatly reduced their direct cross-border and local affiliates’ lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with banks’ financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates’ lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.
Book Synopsis CoMap: Mapping Contagion in the Euro Area Banking Sector by : Mehmet Ziya Gorpe
Download or read book CoMap: Mapping Contagion in the Euro Area Banking Sector written by Mehmet Ziya Gorpe and published by International Monetary Fund. This book was released on 2019-05-10 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a novel approach to investigate and model the network of euro area banks’ large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral linkages. We develop a Contagion Mapping model fully calibrated with bank-level data to study the contagion potential of an exogenous shock via credit and funding risks. We find that tipping points shifting the euro area banking system from a less vulnerable state to a highly vulnerable state are a non-linear function of the combination of network structures and bank-specific characteristics.
Book Synopsis Risk Topography by : Markus Brunnermeier
Download or read book Risk Topography written by Markus Brunnermeier and published by University of Chicago Press. This book was released on 2014-10-17 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent financial crisis and the difficulty of using mainstream macroeconomic models to accurately monitor and assess systemic risk have stimulated new analyses of how we measure economic activity and the development of more sophisticated models in which the financial sector plays a greater role. Markus Brunnermeier and Arvind Krishnamurthy have assembled contributions from leading academic researchers, central bankers, and other financial-market experts to explore the possibilities for advancing macroeconomic modeling in order to achieve more accurate economic measurement. Essays in this volume focus on the development of models capable of highlighting the vulnerabilities that leave the economy susceptible to adverse feedback loops and liquidity spirals. While these types of vulnerabilities have often been identified, they have not been consistently measured. In a financial world of increasing complexity and uncertainty, this volume is an invaluable resource for policymakers working to improve current measurement systems and for academics concerned with conceptualizing effective measurement.
Book Synopsis The Great Cross-Border Bank Deleveraging by : Mr.Eugenio Cerutti
Download or read book The Great Cross-Border Bank Deleveraging written by Mr.Eugenio Cerutti and published by INTERNATIONAL MONETARY FUND. This book was released on 2014-09-25 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: International banks greatly reduced their direct cross-border and local affiliates’ lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with banks’ financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates’ lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.
Book Synopsis Contagion! Systemic Risk in Financial Networks by : T. R. Hurd
Download or read book Contagion! Systemic Risk in Financial Networks written by T. R. Hurd and published by Springer. This book was released on 2016-05-25 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume presents a unified mathematical framework for the transmission channels for damaging shocks that can lead to instability in financial systems. As the title suggests, financial contagion is analogous to the spread of disease, and damaging financial crises may be better understood by bringing to bear ideas from studying other complex systems in our world. After considering how people have viewed financial crises and systemic risk in the past, it delves into the mechanics of the interactions between banking counterparties. It finds a common mathematical structure for types of crises that proceed through cascade mappings that approach a cascade equilibrium. Later chapters follow this theme, starting from the underlying random skeleton graph, developing into the theory of bootstrap percolation, ultimately leading to techniques that can determine the large scale nature of contagious financial cascades.
Book Synopsis Global Waves of Debt by : M. Ayhan Kose
Download or read book Global Waves of Debt written by M. Ayhan Kose and published by World Bank Publications. This book was released on 2021-03-03 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Author :International Monetary Fund. Monetary and Capital Markets Department Publisher :INTERNATIONAL MONETARY FUND ISBN 13 :9781498372930 Total Pages :0 pages Book Rating :4.3/5 (729 download)
Book Synopsis Global Financial Stability Report, April 2015 by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Global Financial Stability Report, April 2015 written by International Monetary Fund. Monetary and Capital Markets Department and published by INTERNATIONAL MONETARY FUND. This book was released on 2015-04-15 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The current report finds that, despite an improvement in economic prospects in some key advanced economies, new challenges to global financial stability have arisen. The global financial system is being buffeted by a series of changes, including lower oil prices and, in some cases, diverging growth patterns and monetary policies. Expectations for rising U.S. policy rates sparked a significant appreciation of the U.S. dollar, while long term bond yields in many advanced economies have decreased—and have turned negative for almost a third of euro area sovereign bonds—on disinflation concerns and the prospect of continued monetary accommodation. Emerging markets are caught in these global cross currents, with some oil exporters and other facing new stability challenges, while others have gained more policy space as a result of lower fuel prices and reduced inflationary pressures. The report also examines changes in international banking since the global financial crisis and finds that these changes are likely to promote more stable bank lending in host countries. Finally, the report finds that the asset management industry needs to strengthen its oversight framework to address financial stability risks from incentive problems between end-investors and portfolio managers and the risk of runs due to liquidity mismatches.
Book Synopsis Sovereigns and Financial Intermediaries Spillovers by : Mr.Hamid R Tabarraei
Download or read book Sovereigns and Financial Intermediaries Spillovers written by Mr.Hamid R Tabarraei and published by International Monetary Fund. This book was released on 2019-02-27 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the spillover effects between sovereigns and banks in a model with a heterogeneous banking system. An increase in sovereign’s default risk affects financial intermediaries through two channels in this model. First, banks’ funding costs might increase, inducing higher interest rates on loans and bonds and a cut back in these assets. Second, financial regulator’s risk-weighted asset framework would assign higher weights to lower quality assets, implying a portfolio rebalancing and more deleveraging. While capital adequacy requirements weaken the impact of shocks emerging from the real economy, they amplify the effect of shocks on banks’ balance sheets.
Book Synopsis Financial Crises Explanations, Types, and Implications by : Mr.Stijn Claessens
Download or read book Financial Crises Explanations, Types, and Implications written by Mr.Stijn Claessens and published by International Monetary Fund. This book was released on 2013-01-30 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.
Book Synopsis Lessons and Policy Implications from the Global Financial Crisis by : Mr.Luc Laeven
Download or read book Lessons and Policy Implications from the Global Financial Crisis written by Mr.Luc Laeven and published by International Monetary Fund. This book was released on 2010-02-01 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: The ongoing global financial crisis is rooted in a combination of factors common to previous financial crises and some new factors. The crisis has brought to light a number of deficiencies in financial regulation and architecture, particularly in the treatment of systemically important financial institutions, the assessments of systemic risks and vulnerabilities, and the resolution of financial institutions. The global nature of the financial crisis has made clear that financially integrated markets, while offering many benefits, can also pose significant risks, with large real economic consequences. Deep reforms are therefore needed to the international financial architecture to safeguard the stability of an increasingly financially integrated world.
Book Synopsis Financial Crises by : Mr.Stijn Claessens
Download or read book Financial Crises written by Mr.Stijn Claessens and published by International Monetary Fund. This book was released on 2014-02-19 with total page 670 pages. Available in PDF, EPUB and Kindle. Book excerpt: The lingering effects of the economic crisis are still visible—this shows a clear need to improve our understanding of financial crises. This book surveys a wide range of crises, including banking, balance of payments, and sovereign debt crises. It begins with an overview of the various types of crises and introduces a comprehensive database of crises. Broad lessons on crisis prevention and management, as well as the short-term economic effects of crises, recessions, and recoveries, are discussed.
Book Synopsis Substitution Between Net and Gross Settlement Systems by : Ben R. Craig
Download or read book Substitution Between Net and Gross Settlement Systems written by Ben R. Craig and published by . This book was released on 2016 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: While net settlement systems make more efficient use of liquidity than gross settlement systems, they are known to generate systemic risk. What does that tendency imply for the stability of the payments [or financial] system when the two settlement systems coexist? Do liquidity shortages induce banks to settle more transactions in net settlement system, thereby increasing systemic risk? Or do banks require their counterparties to send payments through gross settlement system when default risks are high, increasing the need for liquidity and the money market rate but reducing overall systemic risk? This paper studies the factors that drive the relative importance of net and gross settlement systems over the short run, using daily data on transaction volumes from the large-volume payment systems of all euro area countries that have had both a net and a gross settlement system at the same time. Applying a large portfolio of different econometric techniques, we find that it is actually the transactions volumes in gross settlement systems that affect the daily price of liquidity and the credit risk spread in money markets.
Book Synopsis From Bail-out to Bail-in by : Virginia Skidmore Rutledge
Download or read book From Bail-out to Bail-in written by Virginia Skidmore Rutledge and published by International Monetary Fund. This book was released on 2012-04-24 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.
