nep-net New Economics Papers
on Network Economics
Issue of 2014‒05‒17
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Friendship between Banks: An Application of an Actor-Oriented Model of Network Formation on Interbank Credit Relations By Karl Finger; Thomas Lux
  2. Identifying central bank liquidity super-spreaders in interbank funds networks By Carlos León; Clara Machado; Miguel Sarmiento
  3. Modular scale-free architecture of Colombian financial networks: Evidence and challenges with financial stability in view By Carlos León; Ron J. Berndsen
  4. Coworkers, Networks, and Job Search Outcomes By Perihan Ozge Saygin; Andrea Weber; Michèle A. Weynandt

  1. By: Karl Finger; Thomas Lux
    Abstract: This paper investigates the driving forces behind banks’ link formation in the interbank market by applying the stochastic actor oriented model (SAOM) developed in sociology. Our data consists of quarterly networks constructed from the transactions on an electronic platform (e-MID) over the period from 2001 to 2010. Estimating the model for the time before and after the global financial crisis (GFC), shows relatively similar behavior over the complete period. We find that past trades are a significant predictor of future credit relations which indicates a strong role for the formation of lasting relationships between banks. We also find strong importance of size-related characteristics, but little influence of past interest rates. The major changes found for the period after the onset of the financial crisis are that: (1) large banks and those identified as `core´ intermediaries became even more popular and (2) indirect counterparty risk appears to be more of a concern as indicated by a higher tendency to avoid indirect exposure via clustering effects
    Keywords: interbank market, network formation, financial crisis
    JEL: G21 G01 C35
    Date: 2014–04
  2. By: Carlos León; Clara Machado; Miguel Sarmiento
    Abstract: Evidence suggests that the Colombian interbank funds market is an inhomogeneous and hierarchical network in which a few financial institutions fulfill the role of “super-spreaders” of central bank liquidity among market participants. Results concur with evidence from other interbank markets and other financial networks regarding the flaws of traditional direct financial contagion models based on homogeneous and non-hierarchical networks, and provide further evidence about financial networks’ self-organization emerging from complex adaptive financial systems. Our research work contributes to central bank’s efforts by (i) examining and characterizing the actual connective structure of interbank funds networks; (ii) identifying those financial institutions that may be considered as the most important conduits for monetary policy transmission, and the main drivers of contagion risk within the interbank funds market; (iii) providing new elements for the implementation of monetary policy and for safeguarding financial stability.
    Keywords: Interbank, monetary policy, contagion, networks, super-spreader, central bank.
    JEL: E5 G2 L14
    Date: 2014–04–28
  3. By: Carlos León; Ron J. Berndsen
    Abstract: Scale-free (inhomogeneous) connective structures with modular (highly clustered) hierarchies are ubiquitous in real–world networks. Evidence from the main Colombian payment and settlement systems verifies that local financial networks have self-organized into a modular scale-free architecture that favors everyday robustness and performance in exchange for rare episodes of fragility but rapid evolution. Results provide new elements for understanding and modeling the formation and structure of financial networks, and suggest new insights and challenges for authorities contributing to their stability. For instance, (i) the observed architecture suggests that financial systems are complex adaptive systems; (ii) complex adaptive features invalidate traditional reductionist assumptions for modeling financial systems (e.g. homogeneity, normality, static equilibrium, linearity); (iii) the observed modular scale-free architecture tends to limit cascades and isolate feedbacks; and (iv) with financial stability in view, authorities should understand and take advantage of the existing architecture by means of designing and implementing macro-prudential regulation and system-calibrated requirements. Yet, the quest for discovering, explaining and handling the emerging structure of financial systems is an enduring task.
    Keywords: Networks, complex adaptive systems, self-organization, financial system, scale-free, financial stability
    JEL: D85 E42 C38 D53 G20 L14
    Date: 2013–12–23
  4. By: Perihan Ozge Saygin; Andrea Weber; Michèle A. Weynandt
    Abstract: Social networks are an important channel of information transmission in the labor market. This paper studies the mechanisms by which social networks have an impact on labor market outcomes of displaced workers. We base our analysis on administrative records for the universe of private sector employment in Austria where we define work-related networks formed by past coworkers. To distinguish between mechanisms of information transmission, we adopt two different network perspectives. From the job-seeker's perspective we analyze how network characteristics affect job finding rates and wages in the new jobs. Then we switch to the perspective of the hiring firm and analyze which types of displaced workers get hired by firms that are connected to a closing firm via past coworker links. Our results indicate that employment status and the firm types of former coworkers are crucial for the job finding success of their displaced contacts. Moreover, 21% of displaced workers find a new job in a firm that is connected to their former workplace. Among all workers that were displaced from the same closing firm those with a direct link to a former coworker are twice as likely to be hired by the connected firm than workers without a link. These results highlight the role of work related networks in the transmission of job information and strongly suggest that job referrals are an important mechanism.
    Keywords: Social Networks, Job Displacement, Plant Closure, Referral Hiring
    JEL: J63 J64 M51
    Date: 2014–05

This nep-net issue is ©2014 by Yi-Nung Yang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.