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Contagion in the interbank market and its determinants

Author

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  • Memmel, Christoph
  • Sachs, Angelika
Abstract
Carrying out interbank contagion simulations for the German banking sector for the period from the first quarter of 2008 to the second quarter of 2011, we obtain the following results: (i) The system becomes less vulnerable to direct interbank contagion over time. (ii) The loss distribution for each point in time can be condensed into one indicator, the expected number of failures, without much loss of information. (iii) Important determinants of this indicator are the banks' capital, their interbank lending in the system, the loss given default and how equal banks spread their claims among other banks.

Suggested Citation

  • Memmel, Christoph & Sachs, Angelika, 2011. "Contagion in the interbank market and its determinants," Discussion Paper Series 2: Banking and Financial Studies 2011,17, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp2:201117
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    References listed on IDEAS

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    More about this item

    Keywords

    Interbank market; contagion; time dimension;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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