Robustness of banking networks to idiosyncratic and systemic shocks: a network-based approach

We propose a network-based structural model of credit risk to demonstrate how idiosyncratic and systemic shocks propagate across the banking system and evaluate the costs. The banking system is built as a network of heterogeneous banks which are connected with one another. In such a system, single credit events propagate through the interbank market from debtors to creditors and across the system. The shock is imposed as an unexpected event. We demonstrate that while idiosyncratic shocks cannot substantially disturb the banking system, a systemic shock of even a moderate magnitude can be highly detrimental. Such shock includes a huge contagious potential. We demonstrate that the costs of the shock are largely determined by the extent of contagion and range from negligible to catastrophic. The results imply that a severe crisis has to be initiated by a systemic shock of at least moderate magnitude. Capital ratio and the bank size are two additional factors of the banking system stability. Finally, credit risk analysis is sensitive to the network topology and exhibits a profound nonlinear characteristic.     

The Responsiveness of Corporate Investments to Changes in Corporate Income Taxation During the Financial Crisis: Empirical Evidence from Slovenian Firms

I examine the responsiveness of corporate investments to changes in corporate income taxation during the financial crisis. When investigating tax effects in financially constrained firms, the model of investment demand needs to be extended to include an additional channel through which taxes could affect investments. I model the tax effects via two transmission channels, the traditional user cost of capital channel and the cash flow channel, which is crucial for financially constrained firms. The empirical results show that corporate investments in financially constrained firms do not respond to changes in corporate income taxation through the user cost of capital channel, but there is strong evidence of the effect that materializes through the cash flow channel.     

Mobile Dwelling Unit Developed by a Group of Mechanical Engineering Design Students

The increasing number of homeless people is one of the most burning problems of nowadays world. Society has to find the way to fight against it and provide help to those people that have no place to stay. For short-term interventions, the application of the mobile dwelling units seems to be the only possible solution. However, existing mobile dwelling units are rather limited to specific areas of application. A group of students faced this problem and decided to develop an alternative, more universal mobile dwelling unit that will fulfil a wide range of different technical and social requirements at a reasonable price. The paper describes a systematic approach to development of the mobile dwelling unit, which was performed as a part of the education process at the Faculty of Mechanical Engineering, University of Maribor. The project presented is interdisciplinary. In addition to the educational aspect that is emphasized in this paper, technical, economic and social aspects of the project have also a very important role. From educational point of view, the project was concluded successfully. Moreover, we believe our proposal for a mobile dwelling unit is both novel and suitable for general application. This revised version was published online in July 2006 with corrections to the Cover Date.     

Interbank rules during economic declines: Can banks safeguard capital base?

Journal of Economic Interaction and Coordination - This paper studies the role of interbank credit within an agent-based model of the financial sector. Our main contribution consists in a...