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Panic and propagation in 1873: A network analytic approach

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journal contribution
posted on 2023-05-16, 12:12 authored by D Ladley, PL Rousseau
We assess systemic risk in the U.S. banking system before and after the Panic of 1873, using a combination of linear programming and computational optimization to estimate the interbank network. We impose liquidity shocks resembling those of 1873, and find the network captures the distribution of interbank deposits a year later. The network predicts banks likely to panic in the crisis, and those banks see their balance sheets weaken in the year after the crisis more than others. The results shed light on the nature and regional pattern of withdrawals in a classic 19th-century U.S. financial crisis.

History

Author affiliation

School of Business, University of Leicester

Version

  • VoR (Version of Record)

Published in

Journal of Banking and Finance

Volume

151

Pagination

106844

Publisher

Elsevier BV

issn

0378-4266

Copyright date

2023

Available date

2023-05-16

Language

en

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