Erschienen in:Bundesbank Discussion Paper ; No. 23/2014
Umfang:
1 Online-Ressource (37 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.2796997
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments 2014 erstellt
Beschreibung:
When banks choose similar investment strategies, the financial system becomes vulnerable to common shocks. Banks decide about their investment strategy ex-ante based on a private belief about the state of the world and a social belief formed from observing the actions of peers. When the social belief is strong and the financial network is fragmented, banks follow their peers and their investment strategies synchronize. This effect is stronger for less informative private signals. For endogenously formed interbank networks, however, less informative signals lead to higher network density and less synchronization. It is shown that the former effect dominates the latter