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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Liaisons Dangereuses: Increasing Connectivity, Risk Sharing, and Systemic Risk
Organization Unit
Authors
  • Stefano Battiston
  • Domenico Delli Gatti
  • Mauro Gallegati
  • Bruce Greenwald
  • Joseph E Stiglitz
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Journal of Economic Dynamics and Control
Publisher Elsevier
Geographical Reach international
ISSN 0165-1889
Volume 36
Number 8
Page Range 1121 - 1141
Date 2012
Abstract Text The recent financial crisis poses the challenge to understand how systemic risk arises endogenously and what architecture can make the financial system more resilient to global crises. This paper shows that a financial network can be most resilient for intermediate levels of risk diversification, and not when this is maximal, as generally thought so far. This finding holds in the presence of the financial accelerator, i.e. when negative variations in the financial robustness of an agent tend to persist in time because they have adverse effects on the agent's subsequent performance through the reaction of the agent's counterparties.
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Digital Object Identifier 10.1016/j.jedc.2012.04.001
Other Identification Number merlin-id:10140
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