Arbeitspapier

Contagious herding and endogenous network formation in financial networks

When banks choose similar investment strategies, the financial system becomes vulnerable to common shocks. Banks decide about their investment strategy ex-ante based on a private belief about the state of the world and a social belief formed from observing the actions of peers. When the social belief is strong and the financial network is fragmented, banks follow their peers and their investment strategies synchronize. This effect is stronger for less informative private signals. For endogenously formed interbank networks, however, less informative signals lead to higher network density and less synchronization. It is shown that the former effect dominates the latter.

ISBN
978-92-899-1108-5
Sprache
Englisch

Erschienen in
Series: ECB Working Paper ; No. 1700

Klassifikation
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
General Equilibrium and Disequilibrium: Financial Markets
Network Formation and Analysis: Theory
Thema
endogenous nancial networks
multi-agent simulations
social learning
systemic risk

Ereignis
Geistige Schöpfung
(wer)
Georg, Co-Pierre
Ereignis
Veröffentlichung
(wer)
European Central Bank (ECB)
(wo)
Frankfurt a. M.
(wann)
2014

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Georg, Co-Pierre
  • European Central Bank (ECB)

Entstanden

  • 2014

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