Financial Contagion in an Open Economy Framework with Money

Student: Kabaev Viacheslav

Faculty: International College of Economics and Finance

Educational Programme: Financial Economics (Master)

Year of Graduation: 2016

The main goal of this work is to construct the flexible model in order to analyze the propagation of banking crisis across financially independent countries. Financial independence here means the presence of own national currency and independent central bank, which acts as lender of last resort, in each country in the model. We use the framework developed by Nikitin, Solovyeva, Urosevic (2014) as a workhorse model. Speaking about incomplete network of links among banks (in terms of interbank loans) we made the conclusion that if the system has more regions with floating exchange rate regime it reduces financial fragility. However, the result for the complete case is: if the system has more regions with floating exchange rate regime it increases financial fragility.

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