NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Networks, Shocks, and Systemic Risk

Daron Acemoglu, Asuman Ozdaglar, Alireza Tahbaz-Salehi

NBER Working Paper No. 20931
Issued in February 2015, Revised in February 2015
NBER Program(s):Economic Fluctuations and Growth

This chapter develops a unified framework for the study of how network interactions can function as a mechanism for propagation and amplification of microeconomic shocks. The framework nests various classes of games over networks, models of macroeconomic risk originating from microeconomic shocks, and models of financial interactions. Under the assumption that shocks are small, we provide a fairly complete characterization of the structure of equilibrium, clarifying the role of network interactions in translating microeconomic shocks into macroeconomic outcomes. This characterization enables us to rank different networks in terms of their aggregate performance. It also sheds light on several seemingly contradictory results in the prior literature on the role of network linkages in fostering systemic risk.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20931

Users who downloaded this paper also downloaded* these:
He and Krishnamurthy w19885 A Macroeconomic Framework for Quantifying Systemic Risk
Clark, Joubert, and Maurel w20167 The Career Prospects of Overeducated Americans
Acemoglu, Ozdaglar, and Tahbaz-Salehi w18727 Systemic Risk and Stability in Financial Networks
Giglio, Kelly, and Pruitt w20963 Systemic Risk and the Macroeconomy: An Empirical Evaluation
Acemoglu, Ozdaglar, and Tahbaz-Salehi w19230 The Network Origins of Large Economic Downturns
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us