In the Quest of Systemic Externalities: A Review of the Literature

Posted: 22 Feb 2010

See all articles by Wolf Wagner

Wolf Wagner

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2010

Abstract

We review the banking literature with the view of identifying systemic externalities arising from bank failures. We are particularly interested in how such externalities may depend on the characteristics of the financial system at the time of failure, and on the characteristics of the failing bank itself. We conclude that the majority of the mechanisms in the literature suggest that externalities are higher at times when other banks are failing as well or are close to failure. We discuss the implications for optimal capital requirements.

Keywords: Banking crisis, systemic risk, welfare, regulation.

JEL Classification: G01, G21, G28

Suggested Citation

Wagner, Wolf, In the Quest of Systemic Externalities: A Review of the Literature (March 2010). CESifo Economic Studies, Vol. 56, Issue 1, pp. 96-111, 2010. Available at SSRN: https://ssrn.com/abstract=1555543 or http://dx.doi.org/ifp022

Wolf Wagner (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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