Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97479
Authors: 
Li, Mei
Milne, Frank
Qui, Junfeng
Year of Publication: 
2013
Series/Report no.: 
Queen's Economics Department Working Paper 1308
Abstract: 
This paper studies contagion and market freezes caused by uncertainty in financial network structures and provides theoretical guidance for central banks. We establish a formal model to demonstrate that, in a financial system where financial institutions are interconnected, a negative shock to an individual financial institution could spread to other institutions, causing market freezes because of creditors' uncertainty about the financial network structure. Central bank policies to alleviate market freezes and contagion, such as information policy, bailout policy and the lender of last resort policy, are examined.
Subjects: 
Interconnection
Market Freezes
Contagion
Financial Crises
JEL: 
D82
G2
Document Type: 
Working Paper

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