Information Contagion and Inter-Bank Correlation in a Theory of Systemic Risk

It was presently found that a credit for money deposited in the Cham-ber was quite equivalent to so much cash in band; and the custom wasintroduced of effecting payments by the transfer of these credits fromthe account of the payer to that of the receiver. In this way the trouble ofcounting large sums of coin, and of transporting it from one part of thecity to another, was wholly avoided. So great were the supposed advan-tages of this method of doing business, that what at first had been vol-untary on the part of the merchants, was afterwards enforced by law.Every merchant...
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Information Contagion and Inter-Bank Correlation in a Theory of Systemic Risk