Interconnected Banks and Systemically Important Exposures Staff working paper 2019-44 Alan Roncoroni, Stefano Battiston, Marco D’Errico, Grzegorz Halaj, Christoffer Kok How do banks' interconnections in the euro area contribute to the vulnerability of the banking system? We study both the direct interconnections (banks lend to each other) and the indirect interconnections (banks are exposed to similar sectors of the economy). These complex linkages make the banking system more vulnerable to contagion risks. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C6, C63, G, G1, G15, G2, G21 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial institutions and intermediation, Financial stability and systemic risk
Are Long-Horizon Expectations (De-)Stabilizing? Theory and Experiments Staff working paper 2019-27 George Evans, Cars Hommes, Isabelle Salle, Bruce McGough Most models in finance assume that agents make trading plans over the infinite future. We consider instead that they are boundedly rational and may only form forecasts over a limited horizon. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C9, C92, D, D8, D84, E Research Theme(s): Financial markets and funds management, Market functioning, Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission