@article{Herzog2015,
  author    = {Herzog, Bodo},
  title     = {Analyzing a Systemic Crisis in Finance},
  journal   = {Journal of Game Theory},
  volume    = {4},
  number    = {2},
  issn      = {2325-0046},
  url       = {http://article.sapub.org/10.5923.j.jgt.20150402.01.html},
  institution = {ESB Business School},
  pages     = {19 -- 25},
  year      = {2015},
  abstract  = {A major lesson of the recent financial crisis is that money market freezes have major macroeconomic implications. This paper develops a tractable model in which we analyze the microeconomic and macroeconomic implications of a systemic banking crisis. In particular, we consider how the systemic crisis affects the optimal allocation of funding for businesses. We show that a central bank should reduce the interest rate to manage a systemic shock and hence smooth the macroeconomic consequences. Moreover, the analysis offers insight on the rational of bank behavior and the role of markets in a systemic crisis. We find that the failure to adopt the optimal policy can lead to economic fragility.},
  language  = {en}
}