Contagion Risk within Firm-Bank Bivariate Networks
By Banco Central do Brasil
This paper proposes a novel way to model a network of firm-bank and bank-bank interrelationships using a unique dataset for the Brazilian economy. The authors show that distress originating from firms can be propagated through the interbank network. Furthermore, they present evidence that the distribution of distress can have contagious effects due to correlated exposures.
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