Author : Mr.Pragyan Deb
Publisher : International Monetary Fund
ISBN 13 : 1475530315
Total Pages : 41 pages
Book Rating : 4.15/5 ( download)
Book Synopsis Market Frictions, Interbank Linkages and Excessive Interconnections by : Mr.Pragyan Deb
Download or read book Market Frictions, Interbank Linkages and Excessive Interconnections written by Mr.Pragyan Deb and published by International Monetary Fund. This book was released on 2016-08-26 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies banks' decision to form financial interconnections using a model of financial contagion that explicitly takes into account the crisis state of the world. This allows us to model the network formation decision as optimising behaviour of competitive banks, where they balance the benefits of forming interbank linkages against the cost of contagion. We use this framework to study various market frictions that can result in excessive interconnectedness that was seen during the crisis. In this paper, we focus on two channels that arise from regulatory intervention—deposit insurance and the too big to fail problem.