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Exchange rate shocks in multicurrency interbank markets

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  • Pierre L. Siklos
  • Martin Stefan

Abstract

We develop a framework for studying financial contagion triggered by exchange rate shocks. To this end, we simulate multicurrency interbank markets with stylized properties and study their behavior in response to sudden appreciations and depreciations of a particular currency. A key result of our analysis is that the concentration of many interbank exposures in the same currency can lead to significant systemic risk.

Suggested Citation

  • Pierre L. Siklos & Martin Stefan, 2020. "Exchange rate shocks in multicurrency interbank markets," CQE Working Papers 9220, Center for Quantitative Economics (CQE), University of Muenster.
    • Handle: RePEc:cqe:wpaper:9220
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