The domino effect: how the GFC spread across the globe

Understanding the Linkage of Public and Private Risk in the Global Economy

Inspired by the worldwide impact of recent financial crises in countries such as the United States, Ireland, Greece and Iceland, a University of Melbourne economist has developed a detailed model of the global financial system as a network of interconnected entities.

Historically, financial crises have been considered to be confined to smaller or developing companies, posing limited risk to the global economy.

But, with the US subprime mortgage crisis largely credited with triggering the subsequent global financial crisis, recent events have shown that large and developed economies have become increasingly intertwined over time.

Dr Matthew Greenwood-Nimmo's global financial model comprises public and private institutions including governments, banks and other financial corporations and introduces new techniques to model the evolution of credit risk within the global financial system.

His work, funded by the Australian Research Council, will also investigate the link between the intensity of spillovers among financial markets and the existing research on extreme events in financial data.

Read about the research in Pursuit

Impact

By studying how the recent global financial crisis spread through the world's financial systems, this project is expected to enhance the ability of governments and policymakers to foresee future crises and strengthen existing safety measures, making the global financial system less vulnerable to future crises and reducing the potential costs to taxpayers.

Investigators

Viet Nguyen - Melbourne Institute

Professor Yongcheol Shin - York University