Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153581
Authors: 
Iyer, Rajkamal
Peydró, José-Luis
Year of Publication: 
2010
Series/Report no.: 
ECB Working Paper 1147
Abstract: 
This paper tests financial contagion due to interbank linkages. For identification we exploit an idiosyncratic, sudden shock caused by a large-bank failure in conjunction with detailed data on interbank exposures. First, we find robust evidence that higher interbank exposure to the failed bank leads to large deposit withdrawals. Second, the magnitude of contagion is higher for banks with weaker fundamentals. Third, interbank linkages among surviving banks further propagate the shock. Finally, we find results suggesting that there are real economic effects. These results suggest that interbank linkages act as an important channel of contagion and hold important policy implications.
Subjects: 
Bank runs
banking crisis
Contagion
Deposit Insurance
Interbank Market
liquidity dry-ups
macro-prudential analysis
systemic risk
wholesale depositors
JEL: 
G21
G28
E58
Document Type: 
Working Paper

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