Measuring the Propagation of Financial Shocks across Southeast Asian Countries: An Interbank-Network Approach and Dynamic Simulation

DOI

10.2991/978-94-6239-752-1_4How to use a DOI?

Keywords

Financial Contagion; Systemic Risk; ASEAN Interbank Network; Monte Carlo Simulation; Macroprudential Policy

Abstract

Financial contagion has been widely accepted to be a trigger for systemic risk in financial systems worldwide. However, the transmission mechanisms underlying this increased systemic risk have not been extensively studied. This study attempts to simulate cross-border interbank financial contagion using the context of Southeast Asian countries (ASEAN). This context is important considering that ASEAN countries have a strong and interconnected financial cooperation framework. The simulation is based on a network of interbank connections channeled through two transmission channels: the interbank liability channel and the market channel. The simulation was conducted using Monte Carlo analysis in both normal and crisis scenarios. Based on the number of bank defaults, equity losses and cascade length, we measured the magnitude of financial contagion from a shock on a single bank. The results also show that the amplification of distress transmitted across the system dominated by interbank channel both in normal and crisis. This study also found that the magnitude of the initial price shock becomes the main driver of systemic damage in crisis conditions only. Lastly, policy recommendation indicates the need of synchronized macroprudential actions across ASEAN to manage cross-border systemic risk.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Saiqa Ilham Akbar
AU  - R. Agus Sartono
AU  - Kusdhianto Setiawan
AU  - Mamduh Mahmadah Hanafi
PY  - 2026
DA  - 2026/09/04
TI  - Measuring the Propagation of Financial Shocks across Southeast Asian Countries: An Interbank-Network Approach and Dynamic Simulation
BT  - Proceedings of the9th International Conference on Business, Economics, Social Sciences & Humanities – Economics, Business and Management Track (ICOBEST-EBM 2026)
PB  - Atlantis Press
SP  - 26
EP  - 40
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-752-1_4
DO  - 10.2991/978-94-6239-752-1_4
ID  - Akbar2026
ER  -