Financial Contagion in a Glance: Using Business Network Contagion Patterns

Financial Contagion in a Glance: Using Business Network Contagion Patterns

Bradut-Vasile VG Bolos (University of Buraimi, Oman)
DOI: 10.4018/978-1-4666-9484-2.ch021
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Abstract

The purposes of this chapter are: to provide an overview over usage of financial contagion in detecting crisis; to provide a conceptual framework for investigating financial abnormalities and their potential spread; to provide a taxonomy for financial abnormalities; to provide a taxonomy of transmission channels for economic and financial abnormalities. The approach of this research is largely based on adaptation of medical sciences research to economic research, mainly the adaptation of Epidemiology to economic sciences. The chapter provides means for investigating in a systematic way cases of abnormalities like cascade business failures, cascade regional or national level economy recession based.
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Background

The economic system is a highly complex system generated by humans and including humans as parts. Humans themselves can be defined as systems. In a systemic approach, humans are subsystems of the economic system. While researching the transmission of diseases among humans one of the issues that are noticeable at the beginning are the variability of humans in size (height, weight), gender (male, female), race, food habits, religion and subsequent behavior, feeding habits, sleeping habits, education, work, exposure to environment, and the list can go on, down to genetic level differences. Humans as systems are themselves highly complex systems, programmed to some extent by their DNA, to some extent by education, to some extent by individual experience to behave in a certain way. The environment humans are facing is also immensely complex. A disease defined as an abnormality occurring within a human, can have a wide variety of causes, and determining them is not an easy process.

Some abnormalities in humans have damaging effects, being defined as diseases. As there are many humans, such abnormalities sometimes can be found in large number of humans, creating identifiable patterns. Flue, cancer, cold, diabetes, beriberi, plague, AIDS, and all other diseases are patterns of human body behavior. There are also other abnormalities, which do not damage the body such as abnormal memory, abnormal height or muscle mass. Medical sciences are divided into sub-sciences that research such diseases and their cure. There is a science that researches the transmission patterns of diseases among human population, the Epidemiology.

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