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Lookup NU author(s): Dr Melanie Parravano Baro
This is the authors' accepted manuscript of an article that has been published in its final definitive form by Wiley, 2019.
For re-use rights please refer to the publisher's terms and conditions.
We explore the role of interbank network structure and premature liquidation costs for the likelihood of financial contagions in a laboratory experiment. We consider complete versus incomplete networks of banks linked together by interbank deposits, and we further vary premature liquidation costs. Subjects play the role of depositors deciding whether or not to withdraw funds from their interconnected bank. We find that when liquidation costs are high, a complete network structure is significantly less vulnerable to financial contagions than an incomplete network structure. However, when liquidation costs are low, network structure is less important for the frequency of financial contagions.
Author(s): Duffy J, Karadimitropoulou A, Parravano M
Publication type: Article
Publication status: Published
Journal: Journal of Money, Credit, and Banking
Print publication date: 01/08/2019
Online publication date: 23/10/2018
Acceptance date: 15/08/2018
Date deposited: 23/11/2018
ISSN (print): 0022-2879
ISSN (electronic): 1538-4616
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