25 Years IWH

Dr Ben Craig

Dr Ben Craig
Current Position

since 6/14

Research Affiliate

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 8/94

Senior Economist

Federal Reserve Bank of Cleveland

Research Interests

  • financial stability
  • network theory
  • financial intermediation

Ben Craig is a senior economist at the Federal Reserve Bank of Cleveland's Research Department and a visiting researcher at the Deutsche Bundesbank Research Centre. He has published on a wide variety of economic topics in journals which include the American Economic Review, the Journal of Political Economy, and the Journal of Monetary Economics.

His current interests include empirical applications and tests of network theory. His recent research includes work on payments systems, bank failures, defining the core in a core-periphery model, and estimating network effects from time-series and cross section data, using regularization methods.

On this website, publications resulting from cooperation with the IWH are listed. A complete list of publications is available on the author's website.

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Dr Ben Craig
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Working Papers

Interbank Lending and Distress: Observables, Unobservables, and Network Structure

Ben Craig Michael Koetter U. Krüger

in: Deutsche Bundesbank Discussion Paper, No. 18/2014 , No. 18, 2014


We provide empirical evidence on the relevance of systemic risk through the interbank lending channel. We adapt a spatial probit model that allows for correlated error terms in the cross-sectional variation that depend on the measured network connections of the banks. The latter are in our application observed interbank exposures among German bank holding companies during 2001 and 2006. The results clearly indicate significant spillover effects between banks’ probabilities of distress and the financial profiles of connected peers. Better capitalized and managed connections reduce the banks own risk. Higher network centrality reduces the probability of distress, supporting the notion that more complete networks tend to be more stable. Finally, spatial autocorrelation is significant and negative. This last result may indicate too-many-to-fail mechanics such that bank distress is less likely if many peers already experienced distress.

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