1. Insolvency and contagion in the Brazilian interbank market.
- Author
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Souza, Sergio R.S., Tabak, Benjamin M., Silva, Thiago C., and Guerra, Solange M.
- Subjects
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BANKRUPTCY , *CONTAGION (Social psychology) , *INTERBANK market , *BANKING industry , *FINANCIAL institutions - Abstract
This paper proposes a new way to model and analyze contagion in interbank networks. We use a unique dataset from the Brazilian financial system and include all active financial intermediaries. We show that the contagion chain has a short propagation path. We find that first-round contagion is generated only by banks and that medium-sized banks can generate contagion, which implies that size is not the sole determinant of importance within networks. Most vulnerable financial institutions are not banks. Finally, we compute a lower bound for the financial system expected losses in a 1-year horizon. The results contribute to the development of a financial stability-monitoring toolkit. [ABSTRACT FROM AUTHOR]
- Published
- 2015
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