nep-net New Economics Papers
on Network Economics
Issue of 2016‒03‒10
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. A Network-based View of the U.S. Energy Sector By Arora, Vipin; Sendich, Elizabeth; Teng, Julia
  2. Contagion in the world's stock exchanges seen as a set of coupled oscillators By Lucia Bellenzier; J{\o}rgen Vitting Andersen; Giulia Rotundo
  4. The Topology of African Exports: emerging patterns on spanning trees By Tanya Araújo,; Ennes Ferreira
  6. Semiparametric Analysis of Network Formation By Koen Jochmans
  7. A Microfounded Design of Interconnectedness-Based Macroprudential Policy By Jose Fique

  1. By: Arora, Vipin; Sendich, Elizabeth; Teng, Julia
    Abstract: We describe portions of the U.S input-output tables through the tools of networks analysis—focusing on either energy intensive industries or those that are part of the separate and distinct energy sector. We first represent both energy intensive and energy sector industries visually through network diagrams for the years 1997, 2002, and 2007. Next, we show that the energy sector is generally more densely connected than either energy intensive industries or all industries over those years, and is more likely to have groups of three sub-sectors all linked as well. We then move to the level of individual industries within the broad sectors and find that energy intensive industries have the most in-coming connections on average for these tables. Energy sector ones have fewer, but the number grows over time, as do outgoing connections. Other measures of centrality—closeness and betweenness—vary over time for both the energy sector and energy intensive industries. Specifically, petroleum refining and electricity generation stand out for their centrality, drilling oil and gas wells for its lack of centrality.
    Keywords: network analysis,input/output
    JEL: D85 C67 Q4
  2. By: Lucia Bellenzier; J{\o}rgen Vitting Andersen; Giulia Rotundo
    Abstract: We study how the phenomenon of contagion can take place in the network of the world's stock exchanges due to the behavioral trait "blindeness to small changes". On large scale individual, the delay in the collective response may significantly change the dynamics of the overall system. We explicitely insert a term describing the behavioral phenomenon in a system of equations that describe the build and release of stress across the worldwide stock markets. In the mathematical formulation of the model, each stock exchange acts as an integrate-and-fire oscillator. Calibration on market data validate the model. One advantage of the integrate-and-fire dynamics is that it enables for a direct identification of cause and effect of price movements, without the need for statistical tests such as for example Granger causality tests often used in the identification of causes of contagion. Our methodology can thereby identify the most relevant nodes with respect to onset of contagion in the network of stock exchanges, as well as identify potential periods of high vulnerability of the network. The model is characterized by a separation of time scales created by a slow build up of stresses, for example due to (say monthly/yearly) macroeconomic factors, and then a fast (say hourly/daily) release of stresses through "price-quakes" of price movements across the worlds network of stock exchanges.
    Date: 2016–02
  3. By: Cenk Gokce ADAS (Istanbul University, Faculty of Economics); Bibigul Tussupova (Ministry of National Economy,)
    Abstract: This study set out to examine impact of the global financial crisis on the stock markets returns of China, Japan, India, and USA through E-GARCH model and further it investigates the nature of volatility spillovers between stock indices during the global financial meltdown using Granger Causality test. Daily stock prices are used for the period from 6th of January, 2006 to 22nd of April 2011. The main findings are as follows; in all stock markets high volatility and setback on the daily returns exist due to the financial crisis. Further the global financial crisis less affected China’s stock exchange than the other stock markets whereas it influenced USA stock markets in large extent. Also stock returns volatility get moderated in the major Asian Countries stock markets after post crisis period but it has been remained in USA stock exchanges. Granger causality test shows that after the onset of the financial crisis, the USA stock markets have bidirectional influences on each other, but didn’t receive any volatility spillover from major Asian Countries stock markets. Indian stock market receives volatility spillover from all the stock markets. Japanese stock market receives volatility spillover only from USA stock markets. Chinese stock exchange doesn’t receive any volatility spillover from stock exchanges which examined in this paper.
    Keywords: Volatility Spillover; Financial crisis; China, Japan, India and USA Stock Markets; E-GARCH; Granger Causality.
    JEL: C58 G01
  4. By: Tanya Araújo,; Ennes Ferreira
    Abstract: This paper is a contribution to interweaving two lines of research that have progressed in separate ways: network analyses of interna- tional trade and the literature on African trade and development. Gathering empirical data on African countries has important limi- tations and so does the space occupied by African countries in the analyses of trade networks. Here, these limitations are dealt with by the de?nition of two independent bipartite networks: a destination share network and a commodity share network. These networks - together with their corresponding minimal spanning trees - allow to uncover some ordering emerging from African exports in the broader context of international trade. The emerging patterns help to understand important characteristics of African exports and its binding relations to other economic, geographic and organizational concerns as the recent literature on African trade, development and growth has shown. Key Words : Trade networks, African exports, Spanning trees, Bipartite graphs
    Date: 2016–02
  5. By: Percin Batum (Anadolu University)
    Abstract: The purpose of the exploratory study is to compare the perspectives of management and marketing sciences on networks and reveal out why and how firms become connected and interdependent, and how the relationships affect their ability to compete according to these perspectives. For this purpose, network theory has been taken as a common ground. The management theories which form the network theory and relationship marketing have been discussed. In this paper, the difference between the perception of management and marketing sciences on networks have been expressed in terms of the components of ARA Model. It is possible to notice that some issues have been reverted under different components. This paper aims to put emphasize on that the two arm in arm sciences are in the opposite edges and explain why by presenting the attitude of two different sciences to networks through a model which explains the network theory. It is hoped that this paper helps decision takers to be enlightened if they act as a manager or marketer.
    Keywords: Relationship marketing, The network approach, ARA model, Interaction approach, Resource dependence theory, Social exchange theory, Institutional theory
    JEL: M31 L19 M19
  6. By: Koen Jochmans (Département d'économie)
    Abstract: We consider a statistical model for network formation that features both node-specific heterogeneity parameters and common parameters that reflect homophily among nodes. The goal is to perform statistical inference on the homophily parameters while allowing the distribution of the node heterogeneity to be unrestricted, that is, by treating the node-specific parameters as fixed effects. Jointly estimating all the parameters leads to asymptotic bias that renders conventional confidence intervals incorrectly centered. As an alternative, we develop an approach based on a sufficient statistic that separates inference on the homophily parameters from estimation of the fixed effects. This estimator is easy to compute and is shown to have desirable asymptotic properties. In numerical experiments we find that the asymptotic results provide a good approximation to the small-sample behavior of the estimator. As an empirical illustration, the technique is applied to explain the import and export patterns in a cross-section of countries.
    Keywords: conditional inference, degree heterogeneity, directed random graph, fixed effects, homophily, U-statistic.
    Date: 2016–02
  7. By: Jose Fique
    Abstract: To address the challenges posed by global systemically important banks (G-SIBs), the Basel Committee on Banking Supervision recommended an “additional loss absorbency requirement” for these institutions. Along these lines, I develop a microfounded design of capital surcharges that target the interconnectedness component of systemic risk. These surcharges increase the costs of establishing interbank connections, which leads to a non-monotonic welfare effect. While reduced interconnectedness decreases welfare by restricting the ability of banks to insure against liquidity shocks, it also increases it by reducing contagion when an interconnected bank fails. Thus, the regulator faces a trade-off between efficiency and financial stability. Furthermore, I show that capital requirements are more effective than default fund contributions when tail-risk exposure is the private information of banks. I conclude by analyzing how resolution regimes and stable funding requirements interact with these surcharges.
    Keywords: Financial Institutions, Financial system regulation and policies
    JEL: D82 D85 G21 G28
    Date: 2016

This nep-net issue is ©2016 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.