Interaction between supply chain contagion and interbank contagion (IMAGE)

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Interaction between supply chain contagion and interbank contagion

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The new risk model captures the interaction between supply chain contagion in the real economy (W-layer) and interbank contagion (L-layer). In scenario (a), interbank contagion generates losses from the loan default of firm f. In scenario (c), firm f is embedded in a supply network. Supply chain contagion amplifies losses from interbank contagion (purple bars in (b) and (d)) by 70%.

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