A0192
Title: Good contagion: What do networks say about policy transmission
Authors: Kumushoy Abduraimova - Durham University (United Kingdom) [presenting]
Abstract: Contagion is frequently considered as something bad, as a small initial shock amplifying into a systemic crisis, as financial distress propagating from one bank to another, or as a spread of infectious disease. A different perspective is taken. The focus is on how contagion can facilitate monetary policy transmission throughout the network. We develop a multi-layer network-based contagion centrality measure and apply it to analyse the transmission efficiency of the European Central Banks interest rate policy measures undertaken to tackle the low for long inflation. This is the first study, to our knowledge, that addresses policy transmission from a network perspective. The main finding of this analysis is that the policy transmits most efficiently during severe bearish contagion and is least efficient during intense bullish contagion. This finding could be attributed to the level of attention that markets pay to policy announcements during turmoil and calm periods.
