Interconnectedness and Contagion Analysis: A Practical Framework
50 Pages Posted: 21 Nov 2019
Date Written: October 2019
The analysis of interconnectedness and contagion is an important part of the financial stability and risk assessment of a country's financial system. This paper offers detailed and practical guidance on how to conduct a comprehensive analysis of interconnectedness and contagion for a country's financial system under various circumstances. We survey current approaches at the IMF for analyzing interconnectedness within the interbank, cross-sector and cross-border dimensions through an overview and examples of the data and methodologies used in the Financial Sector Assessment Program. Finally, this paper offers practical advice on how to interpret results and discusses potential financial stability policy recommendations that can be drawn from this type of in-depth analysis.
Keywords: Financial regulation and supervision, Financial crises, Financial institutions, Financial systems, Macroprudential policies and financial stability, Interconnectedess, Contagion, Financial Stability, Risk Analysis, Systemic Risk., WP, interbank, cross-sectoral, market data, cross-border
JEL Classification: G00, G1, G2, C5, G21, E63, E01, F16
Suggested Citation: Suggested Citation