Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197954 
Year of Publication: 
2017
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2017-29
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We examine the effect of ex-post information contagion on the ex-ante level of systemic risk defined as the probability of joint bank default. Because of counterparty risk or common exposures, bad news about one bank reveals valuable information about another bank, triggering information contagion. When banks are subject to common exposures, information contagion induces small adjustments to bank portfolios and therefore increases overall systemic risk. When banks are subject to counterparty risk, by contrast, information contagion induces a large shift toward more prudential portfolios, thereby reducing systemic risk.
Subjects: 
Financial institutions
Financial stability
JEL: 
G01
G11
G21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
814.56 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.