Credit Freezes, Equilibrium Multiplicity, and Optimal Bailouts in Financial Networks

• 成果类型: Article
• 署名作者: Jackson, Matthew O.; Pernoud, Agathe
• 署名单位: Stanford University; University of Chicago
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhad096
• 发表日期: 2024
• 页码: 2017
• 关键词: systemic risk; contagion; STABILITY; cost

摘要

We analyze how interdependencies in financial networks can lead to self-fulfilling insolvencies and multiple possible equilibrium outcomes. Multiplicity arises if a certain type of dependency cycle exists in the network. We show that finding the cheapest bailout policy that prevents self-fulfilling insolvencies is computationally hard, but that the optimal policy has intuitive features in some typical network structures. Leveraging indirect benefits ensures systemic solvency at a cost that never exceeds half of the overall shortfall. In core-periphery networks, it is optimal to bail out peripheral banks first as opposed to core banks.