CSH Talk by Abraham Hinteregger: “Systemic risk in the Austrian economy”

Join us for a talk by Abraham Hinteregger on June 30 at 2:15 pm in Seminar Room 101 on “Systemic risk in the Austrian economy”.

Abstract:

Systemic risk is the notion that a shock may not only render directly affected components but (possibly large) parts of the network non-functioning due to cascading effects. In a financial network this systemic risk stems from the exposures of lending institutes to one another. Network measures such as DebtRank were used to estimate the possible impact on the interbank network resulting from a market shock. In this talk, I extend the analysis of systemic risk from financial institutes to the whole economy and find that the DebtRank distribution of companies is qualitatively similar to the distribution of financial institutes. Companies may have exposures to a disadvantageous set of banks, thus enabling the propagation of an impact through large parts of the network. Even though larger companies tend to have a higher DebtRank, there are companies sharing a very similar DebtRank with total assets that span multiple orders of magnitude. The results suggest that from a systemic risk perspective companies and banks have some similarities. It may therefore be beneficial to extend regulations that try to alleviate systemic collapses to the whole economy.