This paper examines the possibility that financial contagion may be spread from one bank to another via the Australian payments system. The initial study of payments system risk was undertaken by Humphrey (1986) who found significant risk in the U.S. Fedwire system in the mid 1980s. Subsequent studies by Angelini, Maresca & Russo (1996), Kuussaari (1996), Northcott (2002) and Furfine (2003) hav...

How did problems in a relatively small portion of the home mortgage market trigger the most severe financial crisis in the United States since the Great Depression? Several developments played a role, including the proliferation of complex mortgage-backed securities and derivatives with highly opaque structures, high leverage, and inadequate risk management. These, in turn, created systemic ris...

Despite increasing evidence that banking crises are brought about by changes in both micro factors and the macro environment. Few researchers have conducted empirical studies which systematically examine the concurrent contributions of these changes. This research combines micro and macro approaches, thus devising a modified early warning system it possible to monitor the individual banking dis...

We present a model of flight to quality episodes that emphasizes systemic risk and the Knightian uncertainty surrounding these episodes. Agents make risk management decisions with incomplete knowledge. They understand their own shocks, but are uncertain of how correlated their shocks are with systemwide shocks. Aversion to this uncertainty leads them to question whether their private risk manag...

This paper compares the stability of the US Dual Banking system’s two bank groups, national and state banks, in light of the current financial crisis. The goal of the paper is to answer three distinct questions: first, is there a difference in the (balance sheet-) fragility between the two groups and, second, to what extent has the balance sheet fragility of both groups changed after the beginn...