Related papers: Rigidity and default in production networks
We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of…
Do firm dynamics matter for the transmission of monetary policy? Empirically, the startup rate declines following a monetary contraction, while the exit rate increases, both of which reduce aggregate employment. I present a model that…
This paper extends the classical dividend problem by incorporating a novel, path-dependent mechanism of firm default. In the traditional framework, ruin occurs when the surplus process first reaches zero. In contrast, default in our model…
Realistic credit risk assessment, the estimation of losses from counterparty's failure, is central for the financial stability. Credit risk models focus on the financial conditions of borrowers and only marginally consider other risks from…
Industries learn productivity improvements from their suppliers. The observed empirical importance of these interactions, often omitted by input-output models, mandates larger attention. This article embeds interdependent total factor…
Here we report a comprehensive analysis of the robustness of five high-quality real-world complex weighted networks to errors and attacks of nodes and links. We analyze C. Elegans, Cargo ship, E. Coli, Us Airports and Human brain real-world…
Modern financial networks exhibit a high degree of interconnectedness and determining the causes of instability and contagion in financial networks is necessary to inform policy and avoid future financial collapse. In the American Economic…
This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with…
Individual components of many real-world complex networks produce and exchange resources among themselves. However, because the resource production in such networks is almost always stochastic, fluctuations in the production are…
There is empirical evidence from a range of disciplines that as the connectivity of a network increases, we observe an increase in the average fitness of the system. But at the same time, there is an increase in the proportion of…
Inspired by reliability issues in electric transmission networks, we use a probabilistic approach to study the occurrence of large failures in a stylized cascading failure model. In this model, lines have random capacities that initially…
We study the effects of introducing information inefficiency in a model for a random linear economy with a representative consumer. This is done by considering statistical, instead of classical, economic general equilibria. Employing two…
In this paper I have studied the fiber bundle model with a fraction {\alpha} of infinitely strong fibers. Inclusion of such unbreakable fraction has been proven to affect the failure process in early studies, especially around a critical…
This paper provides the first causal evidence that credit supply expansion caused the 1999-2010 U.S. business cycle mainly through the channel of household leverage (debt-to-income ratio). Specifically, induced by net export growth, credit…
In this work I have studied the effect of disorder and system size in fiber bundle model with a certain range of stress redistribution. The strength of the bundle as well as the failure abruptness is observed with varying disorder, stress…
This chapter reviews key contributions of complexity science to the study of systemic risk in financial systems. The focus is on network models of financial contagion, where I explore various mechanisms of shock propagation, such as…
The death spiral hypothesis in electric utility represents a positive feedback phenomenon in which a regulated utility is driven to financial instability by rising prices and declining demand. We establish conditions for the existence of…
In the wake of the 2008 financial crisis the role of strongly interconnected markets in fostering systemic instability has been increasingly acknowledged. Trade networks of commodities are susceptible to deleterious cascades of supply…
Aggregate and systemic risk in complex systems are emergent phenomena depending on two properties: the idiosyncratic risks of the elements and the topology of the network of interactions among them. While a significant attention has been…
How do cost shocks pass through to prices in markets with price dispersion? We decompose the problem into two layers. In the competition layer, consumers' consideration sets determine equilibrium distributions of normalized margins. In the…