... Information Contagion and Inter-Bank Correlation in a Theory of Systemic Risk Abstract Two aspects of systemic risk, the risk that banks fail together, are modeled and their interaction examined: ... and Mullineaux, 1987) as the formative reason for the commercial-bank clearinghouses in the U.S., and eventually for the Federal Reserve Chari and Jagannathan (1988), Jacklin and Bhattacharya ... evidence against a significant role being played by inter-bank linkages in contagion. 16 9.3 Herding Linked to Managerial Reputation Scharfstein and Stein (1990), Rajan (1994) modeled herding behavior...