Network Reactions to Banking Regulations

Guillermo Ordonez and Selman Erol
Additional contact information
Selman Erol: MIT, CMU

No 1125, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Optimal regulatory restrictions on banks have to solve a delicate balance. Tighter regulations reduce the likelihood of banks’ distress. Looser regulations foster the allocation of funds towards productive investments. With multiple banks, optimal regulation becomes even more challenging. Banks form partnerships in the interbank lending market to face liquidity needs and meet investment possibilities. We show that the interbank network may suddenly collapse once regulations are pushed above a critical level, with a discontinuous increase in systemic risk as banks’ cross-insurance collapses.

Date: 2017
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2017/paper_1125.pdf (application/pdf)

Related works:
Journal Article: Network reactions to banking regulations (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1125

Access Statistics for this paper

More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().