Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/52134 
Year of Publication: 
2011
Series/Report no.: 
Discussion Paper Series 2 No. 2011,12
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
This paper proposes a dynamic multi-agent model of a banking system with central bank. Banks optimize a portfolio of risky investments and riskless excess reserves according to their risk, return, and liquidity preferences. They are linked via interbank loans and face stochastic deposit supply. Evidence is provided that the central bank stabilizes interbank markets in the short-run only. Comparing different interbank network structures, it is shown that money-center networks are more stable than random networks. Systemic risk via contagion is compared to common shocks and it is shown that both forms of systemic risk require different optimal policy responses.
Subjects: 
systemic risk
contagion
common shocks
multi-agent simulations
JEL: 
C63
E52
G01
G21
ISBN: 
978-3-86558-749-7
Document Type: 
Working Paper

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