|
| |
| Dong Beom Choi |
| |
| ''Contagious Runs: Who Initiates?'' |
| ( 2016, Vol. 36 No.1 ) |
| |
| |
| This paper presents a model of contagious panic between two regions with heterogeneous fragilities. When there is no strategic risk, the spillover is always one-directional; the contagion can only originate from the fundamentally weaker region spilling over to the stronger. When strategic risks due to strategic complementarities cause a self-fulfilling panic, the direction of the contagion could be reversed; panic in the stronger region could generate a contagious panic in the weaker. We show that this depends on the difference in severity of coordination problems between the two regions and the scale of potential spillovers. |
| |
| |
| Keywords: Contagion, Self-fulfilling panic, Global games, Network |
JEL: D8 - Information, Knowledge, and Uncertainty: General
G2 - Financial Institutions and Services: General |
| |
| Manuscript Received : Jan 29 2016 | | Manuscript Accepted : Feb 21 2016 |
|
