The hidden architecture of financial contagion: evidence from technological proximity

Purpose Does technology destabilize financial systems, or does it merely redistribute risk across them? This paper aims to contribute to this debate by introducing and empirically testing a novel transmission mechanism, named cross-tech contagion, through which technological similarity may facilitate the propagation of financial disruption. Design/methodology/approach Using an initial sample covering up to 135 countries between 2008 and 2024, the authors integrate binary panel models to explain systemic crises, graph-theoretic network analysis, as well as spatial panel econometrics to identify the existence and extent of this channel. Findings Across specifications confirm that an increase of one standard deviation in the level of technological readiness raises the average predicted probability of a systemic banking crisis by 1.5–1.8 percentage points, compared to a baseline occurrence rate of 4.5%. Similarly, moving from the first to the third quartile of readiness increases the predicted probability from 3.0% to 4.8%. Network analysis illustrates the existence of a two-speed systemic architecture: a systemic core of technologically advanced countries and a peripheral cluster of highly interconnected technologically emerging countries. In addition, spatial dependence models indicate that the indirect effect is more dominant than the direct one: the indirect effect of the cross-tech spillover of crises substantially exceeds the direct domestic effect, providing plausible evidence consistent with a technological contagion channel. Originality/value These results justify macroprudential regulation paying particular attention to potential vulnerabilities related to technology.