Financial Contagion.¶
Allen, F., & Gale, D. (2000). Financial Contagion. Journal of Political Economy, 108(1), 1-33.
Cited by¶
6 citations across 6 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Associative Property Transfer
- In financial markets it is contagion: a default or stress event in one institution transfers across counterparty and perceived-similarity links to others whose fundamentals are unchanged, with sovereign-debt crisis propagation sharing the shape.
This sourceModels contagion across counterparty links, the warranted-causal case where a stress event propagates along network edges (distinct from propagation along mere perceived-similarity links).
Supported in partVerified against the publisher's abstract
Abstract only: Allen & Gale model a small liquidity shock spreading through interregional (counterparty) claims, backing the counterparty-link half of the claim; it says nothing of perceived-similarity links or sovereign-debt propagation.
“A small liquidity preference shock in one region can spread by contagion throughout the economy. The possibility of contagion depends strongly on the completeness of the structure of interregional claims.”
- In financial markets it is contagion: a default or stress event in one institution transfers across counterparty and perceived-similarity links to others whose fundamentals are unchanged, with sovereign-debt crisis propagation sharing the shape.
- Defect
- And in markets, a single mispriced asset or fraudulent institution can propagate consequences through a trading structure that assumed integrity.
This sourceModels how a small, localized liquidity shock at one institution propagates by contagion through the network of interbank claims, dictating system-wide outcomes out of proportion to its origin — a localized deviation propagating through a structure that assumed integrity.
Supported in partVerified against the publisher's abstract
Abstract supports a localized liquidity shock spreading by contagion through interbank claims, not mispriced assets or fraudulent institutions.
“A small liquidity preference shock in one region can spread by contagion throughout the economy. The possibility of contagion depends strongly on the completeness of the structure of interregional claims.”
- And in markets, a single mispriced asset or fraudulent institution can propagate consequences through a trading structure that assumed integrity.
- Propagation
- Economics & supply chains: Market contagion and financial panic, shock propagation through supply networks (demand shocks, bottleneck amplification), innovation diffusion in industries, price discovery and information aggregation in markets, trade-network effects, as Allen and Gale (2000) formalize for interbank claim structures and equilibrium contagion.
This sourceSeminal model of contagion through interbank claims: a localized liquidity shock propagates across the network of exposures into system-wide crisis, with risk depending on the topology of linkages rather than any single bank's soundness; supports the definition of systemic risk and the counterparty/fire-sale propagation example.
Borderline supportVerified against the publisher's abstract
Allen and Gale model contagion as an equilibrium phenomenon among banks holding interregional claims on one another. “A small liquidity preference shock in one region can spread by contagion throughout the economy”, and whether it does “depends strongly on the completeness of the structure of interregional claims”. That is the interbank claim structure and equilibrium contagion the sentence attributes to the work, with the spread of a local shock turning on the pattern of linkages.
“A small liquidity preference shock in one region can spread by contagion throughout the economy. The possibility of contagion depends strongly on the completeness of the structure of interregional claims.”
Two runs of the same check disagreed on this citation; the later verdict is shown and the citation is queued for review.
- Economics & supply chains: Market contagion and financial panic, shock propagation through supply networks (demand shocks, bottleneck amplification), innovation diffusion in industries, price discovery and information aggregation in markets, trade-network effects, as Allen and Gale (2000) formalize for interbank claim structures and equilibrium contagion.
- Systemic Risk
- The essential commitment is the emergence of whole-system failure from local failure: dense interdependence converts a localized shock into a cascading, correlated collapse that no single actor's prudence can prevent.
This sourceSeminal model of contagion through interbank claims: a localized liquidity shock propagates across the network of exposures into system-wide crisis, with risk depending on the topology of linkages rather than any single bank's soundness; supports the definition of systemic risk and the counterparty/fire-sale propagation example.
Supported in partVerified against the publisher's abstract
The abstract backs contagion from a local liquidity shock spreading through interbank claims, but it finds complete (denser) claims structures more robust than incomplete ones, not that density drives collapse.
“A small liquidity preference shock in one region can spread by contagion throughout the economy. The possibility of contagion depends strongly on the completeness of the structure of interregional claims. Complete claims structures are shown to be more robust than incomplete structures.”
- The essential commitment is the emergence of whole-system failure from local failure: dense interdependence converts a localized shock into a cascading, correlated collapse that no single actor's prudence can prevent.
- Teleconnection
- The mechanism-versus-correlation distinction at issue here is the same one Allen and Gale (2000) developed in their model of financial contagion, where the sufficient condition for true contagion is a specifiable transmission channel rather than mere co-movement.
This sourceSeminal model of contagion through interbank claims: a localized liquidity shock propagates across the network of exposures into system-wide crisis, with risk depending on the topology of linkages rather than any single bank's soundness; supports the definition of systemic risk and the counterparty/fire-sale propagation example.
Supported in partVerified against the publisher's abstract
The abstract supports contagion as shock transmission through a structured network of interbank claims, but does not state that a specifiable transmission channel is the sufficient condition distinguishing true contagion from co-movement.
“However, this arrangement is financially fragile. A small liquidity preference shock in one region can spread by contagion throughout the economy. The possibility of contagion depends strongly on the completeness of the structure of interregional claims.”
- The mechanism-versus-correlation distinction at issue here is the same one Allen and Gale (2000) developed in their model of financial contagion, where the sufficient condition for true contagion is a specifiable transmission channel rather than mere co-movement.
Domain-specific¶
- Guilt by Association
- Guilt by association is specifically the associative link (co-membership, co-endorsement, co-presence, shared origin) offered with no such transfer shown. Not the halo effect or social contagion itself. A property propagating along association edges — reputation, blame, default risk, trust — is a real cognitive and network phenomenon that operates with no argument in sight (financial contagion, the halo and horn effects)
This sourceModel in which a small liquidity-preference shock in one region spreads by contagion through interregional bank claims because the arrangement is financially fragile.
Supported in partVerified against the publisher's abstract
“A small liquidity preference shock in one region can spread by contagion throughout the economy.”
- Guilt by association is specifically the associative link (co-membership, co-endorsement, co-presence, shared origin) offered with no such transfer shown. Not the halo effect or social contagion itself. A property propagating along association edges — reputation, blame, default risk, trust — is a real cognitive and network phenomenon that operates with no argument in sight (financial contagion, the halo and horn effects)
Verification¶
Does it exist? Confirmed. This work's DOI resolves to a registered record, which fixes its identity. That is all it fixes.
Does it back the claim? Read against the text for 6 of 6 citations: 5 supported in part, 1 borderline. Each verdict is shown under its citation below, with what in the work backs the sentence.
Support is checked per citation rather than per work — the same source can be cited soundly in one article and wrongly in another. Per-citation recording began recently, so a citation with no recorded check is a gap in the record rather than evidence it went unchecked.
See how references were verified.
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