Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284017 
Year of Publication: 
2023
Series/Report no.: 
Staff Reports No. 1057
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Banks carry significant exposures to nonbanks from direct dealings, but they can also be exposed, indirectly, through losses in asset values resulting from fire-sale events. We assess the vulnerability of U.S. banks to fire sales potentially originating from any of twelve separate nonbank segments and identify network-like externalities driven by the interconnectedness across nonbank types in terms of asset holdings. We document that such network externalities can contribute to very large multiples of an original fire sale, thus suggesting that conventional assessments of fire-sale vulnerabilities can be grossly understated and highlighting the value of treating nonbank financial institutions as one organic whole for monitoring purposes
Subjects: 
fire sales
network externalities
financial stability
nonbanks
monitoring
JEL: 
G21
G23
Document Type: 
Working Paper

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