"14094","7","archive","353",,,"disk0/00/01/40/94","2016-12-07 09:16:04","2021-08-27 17:41:42","2016-12-07 09:16:04","conference_item",,,"show","","","2",,,"Leduc","M.V.","","","8754","","",,,,,"","","Matching and Resilience in Financial Networks","pub","","","prog_asa",,,"When banks extend loans to each other, they generate a negative externality in the form of systemic risk. They create a network of interbank exposures by which they expose other banks to potential insolvency cascades. In this paper, we show how a regulator can use information ab out the financial network to devise a transaction-specific tax based on a network centrality measure that captures systemic importance. Since different transactions have different impact on creating systemic risk, they are taxed differently. We call this tax a Systemic Risk Tax (SRT). We show that this SRT induces a unique equilibrium matching of lenders and borrowers that is systemic-risk efficient, i.e. it minimizes systemic risk given a certain transaction volume. On the other hand, we show that without this SRT multiple equilibrium matchings can exist and are generally inefficient. This allows the regulator to effectively `rewire' the equilibrium interbank network so as to make it more resilient to insolvency cascades, without sacrificing transaction volume. Moreover, we show that a standard financial transaction tax (e.g. a Tobin-like tax) has no impact on reshaping the equilibrium financial network because it taxes all transactions indiscriminately. A Tobin-like tax is indeed shown to have a limited effect on reducing systemic risk while it decreases transaction volume.","2016-11","published",,,"http://www.uni-corvinus.hu/index.php?id=liquidity_conference",,,,,"",,,,,"",,,,,"",,,,,"","",,"",,,,,,,"176","none",,"paper",,,,,,,,"7th Annual Financial Market Liquidity Conference","Budapest, Hungary","17-18 November 2016","conference",,,,,,"FALSE",,,,,,,,"","","","",,"","",,,,,,,"",,,,,"FALSE","no",,"info:eu-repo/semantics/conferenceObject",
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