Short-term liquidity contagion in the interbank market

Carlos León, Constanza Martínez, Freddy Cepeda

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We implement a modified version of DebtRank to recursively measure the contagion effects caused by the default of a selected financial institution. For this paper, contagion is a liquidity issue that is measured as the decrease in financial institutions' short-term liquidity position across the Colombian interbank network. We find that contagion negative effects are concentrated in a few financial institutions. However, as most of their impact is conditional on the occurrence of unlikely major widespread illiquidity events, and due to the subsidiary contribution of the interbank market to the local money market, their overall systemic importance is still to be confirmed.
Original languageEnglish
Pages (from-to)51-80
Number of pages30
JournalCuadernos de Economia (Colombia)
Volume38
Issue number76
DOIs
Publication statusPublished - 2019

Keywords

  • Cesación de pagos
  • Cessation de paiement
  • Cessação de pagamentos
  • Contagio
  • Contagion
  • Contágio
  • DebtRank
  • Default
  • Financial networks
  • Liquidez
  • Liquidity
  • Liquidité
  • Redes financeiras
  • Redes financieras
  • Réseaux financiers

Fingerprint Dive into the research topics of 'Short-term liquidity contagion in the interbank market'. Together they form a unique fingerprint.

Cite this