Systemic risk shifting in financial networks

• 成果类型: Article
• 署名作者: Elliott, Matthew; Georg, Co-Pierre; Hazell, Jonathon
• 署名单位: University of Cambridge; University of Cape Town; Deutsche Bundesbank
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2020.105157
• 发表日期: 2021
• 关键词: Financial networks; Asset correlation; contagion

摘要

Banks face different but potentially correlated risks from outside the financial system. Financial connections can share these risks, but they also create the means by which shocks can be propagated. We examine this tradeoff in the context of a new stylized fact we present: German banks are more likely to have financial connections when they face more similar risks. We develop a model that can rationalize such behavior. We argue that such patterns are socially suboptimal and raise systemic risk, but can be explained by risk shifting. Risk shifting motivates banks to correlate their failures with their counterparties, even though it creates systemic risk. (C) 2020 The Authors. Published by Elsevier Inc.