International Financial Contagion


Book Description

No sooner had the Asian crisis broken out in 1997 than the witch-hunt started. With great indignation every Asian economy pointed fingers. They were innocent bystanders. The fundamental reason for the crisis was this or that - most prominently contagion - but also the decline in exports of the new commodities (high-tech goods), the steep rise of the dollar, speculators, etc. The prominent question, of course, is whether contagion could really have been the key factor and, if so, what are the channels and mechanisms through which it operated in such a powerful manner. The question is obvious because until 1997, Asia's economies were generally believed to be immensely successful, stable and well managed. This question is of great importance not only in understanding just what happened, but also in shaping policies. In a world of pure contagion, i.e. when innocent bystanders are caught up and trampled by events not of their making and when consequences go far beyond ordinary international shocks, countries will need to look for better protective policies in the future. In such a world, the international financial system will need to change in order to offer better preventive and reactive policy measures to help avoid, or at least contain, financial crises.




Transmission of Financial Crises and Contagion:


Book Description

Financial crises often transmit across geographical borders and different asset classes. Modeling these interactions is empirically challenging, and many of the proposed methods give different results when applied to the same data sets. In this book the authors set out their work on a general framework for modeling the transmission of financial crises using latent factor models. They show how their framework encompasses a number of other empirical contagion models and why the results between the models differ. The book builds a framework which begins from considering contagion in the bond markets during 1997-1998 across a number of countries, and culminates in a model which encompasses multiple assets across multiple countries through over a decade of crisis events from East Asia in 1997-1998 to the sub prime crisis during 2008. Program code to support implementation of similar models is available.




Estimating Bilateral Exposures in the German Interbank Market


Book Description

Credit risk associated with interbank lending may lead to domino effects, where the failureKreditrisiken aus Interbankbeziehungen können zu Dominoeffekten führen indem der.




Complex Spreading Phenomena in Social Systems


Book Description

This text is about spreading of information and influence in complex networks. Although previously considered similar and modeled in parallel approaches, there is now experimental evidence that epidemic and social spreading work in subtly different ways. While previously explored through modeling, there is currently an explosion of work on revealing the mechanisms underlying complex contagion based on big data and data-driven approaches. This volume consists of four parts. Part 1 is an Introduction, providing an accessible summary of the state of the art. Part 2 provides an overview of the central theoretical developments in the field. Part 3 describes the empirical work on observing spreading processes in real-world networks. Finally, Part 4 goes into detail with recent and exciting new developments: dedicated studies designed to measure specific aspects of the spreading processes, often using randomized control trials to isolate the network effect from confounders, such as homophily. Each contribution is authored by leading experts in the field. This volume, though based on technical selections of the most important results on complex spreading, remains quite accessible to the newly interested. The main benefit to the reader is that the topics are carefully structured to take the novice to the level of expert on the topic of social spreading processes. This book will be of great importance to a wide field: from researchers in physics, computer science, and sociology to professionals in public policy and public health.




Empirical Modeling of Contagion


Book Description

The existing literature suggests a number of alternative methods to test for the presence of contagion during financial market crises. This paper reviews those methods and shows how they are related in a unified framework. A number of extensions are also suggested that allow for multivariate testing, endogeneity issues, and structural breaks.




Empirical Modeling of Contagion: A Review of Methodologies


Book Description

The existing literature suggests a number of alternative methods to test for the presence of contagion during financial market crises. This paper reviews those methods and shows how they are related in a unified framework. A number of extensions are also suggested that allow for multivariate testing, endogeneity issues, and structural breaks.




Thought Contagion


Book Description

Fans of Douglas Hofstadter, Daniel Bennet, and Richard Dawkins (as well as science buffs and readers of Wired Magazine) will revel in Aaron Lynch’s groundbreaking examination of memetics--the new study of how ideas and beliefs spread. What characterizes a meme is its capacity for displacing rival ideas and beliefs in an evolutionary drama that determines and changes the way people think. Exactly how do ideas spread, and what are the factors that make them genuine thought contagions? Why, for instance, do some beliefs spread throughout society, while others dwindle to extinction? What drives those intensely held beliefs that spawn ideological and political debates such as views on abortion and opinions about sex and sexuality?By drawing on examples from everyday life, Lynch develops a conceptual basis for understanding memetics. Memes evolve by natural selection in a process similar to that of Genes in evolutionary biology. What makes an idea a potent meme is how effectively it out-propagates other ideas. In memetic evolution, the "fittest ideas” are not always the truest or the most helpful, but the ones best at self replication.Thus, crash diets spread not because of lasting benefit, but by alternating episodes of dramatic weight loss and slow regain. Each sudden thinning provokes onlookers to ask, "How did you do it?” thereby manipulating them to experiment with the diet and in turn, spread it again. The faster the pounds return, the more often these people enter that disseminating phase, all of which favors outbreaks of the most pathogenic diets. Like a software virus traveling on the Internet or a flu strain passing through a city, thought contagions proliferate by programming for their own propagation. Lynch argues that certain beliefs spread like viruses and evolve like microbes, as mutant strains vie for more adherents and more hosts. In its most revolutionary aspect, memetics asks not how people accumulate ideas, but how ideas accumulate people. Readers of this intriguing theory will be amazed to discover that many popular beliefs about family, sex, politics, religion, health, and war have succeeded by their "fitness” as thought contagions.




Emotional Contagion


Book Description

A study of the phenomenon of emotion contagion, or the communication of mood to others.




CoMap: Mapping Contagion in the Euro Area Banking Sector


Book Description

This paper presents a novel approach to investigate and model the network of euro area banks’ large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral linkages. We develop a Contagion Mapping model fully calibrated with bank-level data to study the contagion potential of an exogenous shock via credit and funding risks. We find that tipping points shifting the euro area banking system from a less vulnerable state to a highly vulnerable state are a non-linear function of the combination of network structures and bank-specific characteristics.