The spread of a financial virus through Europe and beyond

Olena Kostylenko; Helena Sofia Rodrigues; Delfim F. M. Torres; Olena Kostylenko; Helena Sofia Rodrigues; Delfim F. M. Torres

doi:10.3934/Math.2019.1.86

AIMS Mathematics

2019, Volume 4, Issue 1: 86-98. doi: 10.3934/Math.2019.1.86

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Research article Topical Sections

The spread of a financial virus through Europe and beyond

1.
Center for Research and Development in Mathematics and Applications (CIDMA), Department of Mathematics, University of Aveiro, 3810-193 Aveiro, Portugal
2.
School of Business Studies, Polytechnic Institute of Viana do Castelo, 4930-678 Valença, Portugal

Received: 01 November 2018 Accepted: 21 January 2019 Published: 23 January 2019

We analyse the importance of international relations between countries on the financial stability. The contagion effect in the network is tested by implementing an epidemiological model, comprising a number of European countries and using bilateral data on foreign claims between them. Banking statistics of consolidated foreign claims on ultimate risk bases, obtained from the Banks of International Settlements, allow us to measure the exposure of contagion spreading from a particular country to the other national banking systems. We show that the financial system of some countries, experiencing the debt crisis, is a source of global systemic risk because they threaten the stability of a larger system, being a global threat to the intoxication of the world economy and resulting in what we call a "financial virus". Illustrative simulations were done in the NetLogo multi-agent programmable modelling environment and in MATLAB.
- financial contagion,
- infection spreading,
- network and epidemiological models,
- mathematical modelling
Citation: Olena Kostylenko, Helena Sofia Rodrigues, Delfim F. M. Torres. The spread of a financial virus through Europe and beyond[J]. AIMS Mathematics, 2019, 4(1): 86-98. doi: 10.3934/Math.2019.1.86

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Abstract

We analyse the importance of international relations between countries on the financial stability. The contagion effect in the network is tested by implementing an epidemiological model, comprising a number of European countries and using bilateral data on foreign claims between them. Banking statistics of consolidated foreign claims on ultimate risk bases, obtained from the Banks of International Settlements, allow us to measure the exposure of contagion spreading from a particular country to the other national banking systems. We show that the financial system of some countries, experiencing the debt crisis, is a source of global systemic risk because they threaten the stability of a larger system, being a global threat to the intoxication of the world economy and resulting in what we call a "financial virus". Illustrative simulations were done in the NetLogo multi-agent programmable modelling environment and in MATLAB.

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