The Systemic Impact of Debt Default in a Multilayered Global Network Model
IMF Working Papers, September 2, 2022
Source details
- Canonical URL
- The Systemic Impact of Debt Default in a Multilayered Global Network Model
Other formats
Bibliographic details
- Authors: Nathan Porter, Camilo E Tovar Mora, Juan P Trevino, Johannes Eugster, Theofanis Papamichalis
- Published: September 2, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400218712.001
Overview
- Title: The Systemic Impact of Debt Default in a Multilayered Global Network Model
- Authors: Nathan Porter, Camilo E Tovar Mora, Juan P Trevino, Johannes Eugster, Theofanis Papamichalis
- Date: September 2, 2022
- Series: Working Paper No. 2022/171
- Issue: 171
- Volume: 2022
- Pages: 25
- DOI: https://doi.org/10.5089/9798400218712.001
- ISBN: 9798400218712
- ISSN: 1018-5941
Research question and approach
- Core questions:
- How systemic can the effects of contagion be?
- What specific transmission channels are involved?
- What is their relative importance?
- Methodology:
- A multilayered global network model of contagion that simulates the impact of sovereign debt default on the global economy.
- Development of a measure of global systemic risk.
- Use of bank stress testing techniques to quantify the systemic impact of the shock and the extent of contagion on the global economy.
Key findings
- Economic and financial contagion are highly non-linear.
- Many bystander economies can experience significant negative effects as the initial default is spread through the network.
- The results imply that many economies might be systemically more important than what conventional measures of size or openness might suggest.
Subjects and keywords
- Subjects: Balance of payments, Central banks, Debt default, External debt, Financial contagion, Financial sector policy and analysis, Imports, International reserves, International trade, Portfolio investment
- Keywords: A. measuring interconnectedness, assessing contagion, bystander economy, centrality measure, Contagion, Crises, Debt default, Financial contagion, Global, Imports, International reserves, Network, network centrality, Portfolio investment, Stress-test
Implications and interpretation (as presented)
- The multilayered network and stress-testing results indicate non-linearity in contagion dynamics and sizable spillovers to economies not directly involved in the initial default.
- This suggests a need to consider systemic importance beyond conventional metrics of size or openness.
IMF Working Paper No. 2022/171, September 2, 2022
Content in this bundle
- Working Paper