UiS Working Papers in Economics and Finance,
University of Stavanger

Abstract: Global financial crises have revealed the systemic risk posed by economic contagion. We provide perspectives on the formulation of a game between countries, central banks, banks, firms, households, and financial intergovernmental organizations to model the dynamics between players. We model strategic choices, strategy sets, and utility functions to provide new tools to handle financial crises. The model is illustrated with examples using sensitivity analysis. One country, and two countries, are considered, and we simulate the impacts of random shocks under a variety of assumptions.

Keywords: Contagion; financial risk; game theory; bank; central bank; country; firms; households; intergovernmental organization; consumption; production; capital; default; borrow; lend; financial friction; shock; sensitivity analysis

JEL-codes: A10

10 pages, December 4, 2014

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uis_wps_2014_22_welburn_hausken.pdf  

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