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on Network Economics |
| By: | Eichengreen, Barry; Chiţu, Livia; Mehl, Arnaud |
| Abstract: | Conventional wisdom has it that network effects are strong in markets for homogeneous goods, leading to the dominance of one settlement currency in such markets. The alleged dominance of the dollar in global oil markets is said to epitomize this phenomenon. We question this presumption with evidence for earlier periods showing that several national currencies have simultaneously played substantial roles in global oil markets. European oil import payments before and after World War II were split between the dollar and non-dollar currencies, mainly sterling. Differences in use of the dollar across countries were associated with trade linkages with the United States and the size of the importing country. That several national currencies could simultaneously play a role in international oil settlements suggests that a shift from the current dollar-based system toward a multi-polar system in the period ahead is not impossible. JEL Classification: F30, N20 |
| Keywords: | homogeneous goods, international invoicing currency, network effects, oil markets, US dollar role |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20141651&r=net |
| By: | Hałaj, Grzegorz; Kok, Christoffer |
| Abstract: | Interbank contagion has become a buzzword in the aftermath of the financial crisis that led to a series of shocks to the interbank market and to periods of pronounced market disruptions. However, little is known about how interbank networks are formed and about their sensitivity to changes in key bank parameters (for example, induced by common exogenous shocks or by regulatory initiatives). This paper aims to shed light on these issues by modelling endogenously the formation of interbank networks, which in turn allows for checking the sensitivity of interbank network structures and hence their underlying contagion risk to changes in market-driven parameters as well as to changes in regulatory measures such as large exposures limits. The sequential network formation mechanism presented in the paper is based on a portfolio optimisation model whereby banks allocate their interbank exposures while balancing the return and risk of counterparty default risk and the placements are accepted taking into account funding diversification benefits. The model offers some interesting insights into how key parameters may affect interbank network structures and can be a valuable tool for analysing the impact of various regulatory policy measures relating to banks' incentives to operate in the interbank market. JEL Classification: G21, C63, C78 |
| Keywords: | counterparty risk, interbank network, nancial contagion, nancial regulation |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20141646&r=net |
| By: | Clerc, L.; Gabrieli, S.; Kern, S.; El Omari, Y. |
| Abstract: | Based on a unique data set referencing exposures on single name credit default swaps (CDS) on European reference entities, we study the structure and the topology of the European CDS market and its evolution from 2008 to 2012, resorting to network analysis. The structural features revealed show bilateral CDS exposures describing growing scale-free networks whose highly interconnected hubs constitute both a strength and weakness for the stability of the system. The potential “super spreaders” of financial contagion, identified as the most interconnected participants, consist mostly of banks. For some of them net notional exposures may be particularly large relative to their total common equity. Our findings also point to the importance of some non-dealer/non-bank participants belonging to the shadow banking system. |
| Keywords: | Credit default swaps; Financial networks; Centrality measures; Contagion; Shadow banking. |
| JEL: | E17 E44 E51 G21 G28 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:477&r=net |
| By: | Mathias Staudigl; Simon Weidenholzer |
| Abstract: | We consider a co-evolutionary model of social coordination and network formation where agents may decide on an action in a 2x2 - coordination game and on whom to establish costly links to. We find that a payoff domination convention is selected for a wider parameter range when agents may only support a limited number of links as compared to a scenario where agents are not constrained in their linking choice. The main reason behind this result is that whenever there is a small cluster of agents playing the efficient strategy other players want to link up to those layers and choose the efficient action. |
| Date: | 2014–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:747&r=net |
| By: | ISHIWATA Ayako; Petr MATOUS; TODO Yasuyuki |
| Abstract: | Poverty reduction in rural Africa necessitates diversification of income sources from agriculture to nonfarm activities. Clustering of micro-enterprises in rural areas can promote nonfarm income. This study examines the determinants of growth in sales and skill levels of microenterprises in a tailor cluster in rural Ethiopia, focusing on the role of business networks. We collected panel data, including measures of business networks through procurement, outsourcing, and financing, for three years from 136 firms, the population in the "survival" cluster. The results show that when firms are closer to the center of business networks, i.e., firms are characterized by a higher centrality measure, they are more likely to increase sales. However, although network centrality is also associated with a higher level of tailoring skills, the skill level itself has no significant effect on sales. The finding implies that consumers in the area are not concerned much about the quality of products. Therefore, while expanding business networks can promote sales and skill levels, incentives to upgrade skills are minimal. |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:14014&r=net |
| By: | Ge Jiang; Simon Weidenholzer |
| Abstract: | We study the impact of swtiching costs on the long run outcome in 2x2 conordination games played in the circular city model oflocal interactions. For low levels of switiching costs the predictions are in line with the previous literature and the risk dominant convention is the unique long run equilibrium. For intermediate levels of switching costs the set oflong run equilibria still contain the risk dominant convention but may also contain conventions that are not risk dominant. For high levels of switching costs also non-monomorphic states will be included in the set of long run equilibria. Finally, we reconcile our result with a recent paper by Norman (2009) by considering the case of large interaction neighborhoods in large populations. |
| Date: | 2014–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:746&r=net |
| By: | Kim, Young-Chul; Loury, Glenn |
| Abstract: | Economists have developed theoretical models identifying self-fulfilling expectations as an important source of statistical discrimination in labor markets (Arrow, 1973). The static models dominating the literature of statistical discrimination, however, may leave the false impression that a bad equilibrium is as fragile as a "bubble" and can burst at any moment when expectations flip. Such models thus understate the adversity that disadvantaged groups face in seeking to escape bad equilibria. By developing a dynamic version of a statistical discrimination model based on Coate and Loury's (1993) original setup, we clarify the limits of expectations-related fragility. We show that when a group is strongly affected by negative reputational externalities, the group cannot escape a low skill investment trap, regardless of how expectations are formed. By examining the evolution of stereotypes in this way, we also provide new insights into egalitarian policies. |
| Keywords: | Statistical Discrimination, Collective Reputation, Reputation Trap, Forward-Looking Behavior |
| JEL: | D63 D82 J15 J7 |
| Date: | 2012–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:54950&r=net |