## The Systemic Impact of Debt Default in a Multilayered Global Network Model

_IMF Working Papers, September 2, 2022_

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## 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

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### 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*

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_Source: https://www.imf.org/en/publications/wp/issues/2022/09/02/the-systemic-impact-of-debt-default-in-a-multilayered-global-network-model-522832_