Abstract
The global crisis of 2008 provoked a heightened interest among scientists to study the phenomenon, its propagation and negative consequences. The process of modelling the spread of a virus is commonly used in epidemiology.Conceptually, the spread of a disease among a population is similar to the contagion process in economy. This similarity allows considering the contagion in the world financial system using the same mathematical model of infection spread that is often used in epidemiology. Our research focuses on the dynamic behaviour of contagion spreading in the global financial network. The effect of infection by a systemic spread of risks in the network of national banking systems of countries is tested. An optimal control problem is then formulated to simulate a control that may avoid significant financial losses. The results show that the proposed approach describes well the reality of the world economy, and emphasizes the importance of international relations between countries on the financial stability.
Highlights
Formation of the world market without national barriers contributed to the beginning and further development of a fundamentally new global power system, worldwide
In sections of network analysis (Section 4) and optimal control (Section 5), we consider only the problematic situations, that is, the cases when R0 > 1: the results of simulations for contagion spreading from Canada are not shown because in this situation there is no need to take control measures
We investigated the process of financial contamination from the point of view of infection spreading among countries that form an interconnected closed-form system
Summary
Formation of the world market without national barriers contributed to the beginning and further development of a fundamentally new global power system, worldwide. The International Monetary Fund (IMF) defines globalization as “The growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, freer international capital flows, and more rapid and widespread diffusion of technology” [8]; “The process by which the world becomes a single place” [12]. Economic globalization is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, services, technology, and capital [9]. The global crisis of 2008 has become a significant source of knowledge about the process of synchronization of economic relations during the crisis It reveals that economically weakly connected countries in stable periods, demonstrate a unidirectional movement of macro indicators during the crisis period. We have chosen 13 (thirteen) European and Non-European developed countries (Portugal, Italy, Spain, Ireland, Japan, Belgium, France, United Kingdom, Austria, United States, Sweden, Canada, Germany), based on statistical data from BIS for the end of 2017
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