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Size effect in transitional dynamics of the banking network

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  • Garcia, Alfredo Daniel
  • Szybisz, Martin Andres

Abstract

We consider a developed economy banking system, that, when surpass certain size, may destabilize and even enter in chaos. Taking Deposits (D_t), Reserves (R_t), Loans (L_t), the ratio of (R_t) to (D_t) and a parameter γ that weights endogenously the system memory, we analyse stability and the possibility of chaos. Using data for the U.S. between 1960 and 2012 we found that a maximum instability state is verified in 2008 when the crisis hits the U.S. banking system core carrying to a public bailout. A larger system does not necessarily lead to robustness but can expand to greater fragility. A proposed banking system stability indicator is also analysed.

Suggested Citation

  • Garcia, Alfredo Daniel & Szybisz, Martin Andres, 2017. "Size effect in transitional dynamics of the banking network," MPRA Paper 80195, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:80195
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Banking System; Financial Crises; Instability; Systemic Risk;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises

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