nep-net New Economics Papers
on Network Economics
Issue of 2016‒06‒04
eight papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Networks of volatility spillovers among stock markets By Eduard Baumohl; Evzen Kocenda; Stefan Lyocsa; Tomas Vyrost
  2. Modeling Financial Networks: a feedback approach By Thiago Christiano Silva; Michel Alexandre da Silva; Benjamin Miranda Tabak
  3. Keeping up with the e-Joneses: Do Online Social Networks Raise Social Comparisons? By Fabio Sabatini; Francesco Sarracino
  4. Including excluded groups: The slow racial transformation of the South African university system By Barnard, Helena; Cowan, Robin A.; Kirman, Alan P.; Müller, Moritz
  5. Understanding the shift from micro to macro-prudential thinking: A discursive network analysis By Thiemann, Matthias; Aldegwy, Mohamed; Ibrocevic, Edin
  6. Social Media and Protest Participation: Evidence from Russia By Enikolopov, Ruben; Makarin, Alexey; Petrova, Maria
  7. Modelling Trading Networks and the Role of Trust By Rafael A. Barrio; Tzipe Govezensky; \'Elfego Ruiz-Guti\'errez; Kimmo K. Kaski
  8. The supplier network of exporters : Connecting the dots By Emmanuel Dhyne; Stela Rubínová

  1. By: Eduard Baumohl (Institute of Economics and Management, University of Economics in Bratislava); Evzen Kocenda (Institute of Economic Studies, Charles University); Stefan Lyocsa (Institute of Economics and Management, University of Economics in Bratislava); Tomas Vyrost (Institute of Economics and Management, University of Economics in Bratislava)
    Abstract: In our network analysis of 40 developed, emerging and frontier stock markets during the 2006?2014 period, we describe and model volatility spillovers during both the global financial crisis and tranquil periods. The resulting market interconnectedness is depicted by fitting a spatial model incorporating several exogenous characteristics. We confirm the presence of significant temporal proximity effects between markets and somewhat weaker temporal effects with regard to the US equity market ? volatility spillovers decrease when markets are characterized by greater temporal proximity. Volatility spillovers also present a high degree of interconnectedness, which is measured by high spatial autocorrelation. This finding is confirmed by spatial regression models showing that indirect effects are much stronger than direct effects, i.e., market-related changes in “neighboring” markets (within a network) affect volatility spillovers more than changes in the given market alone. Our results also link spillovers of escalating magnitude with increasing market size, market liquidity and economic openness.
    Keywords: volatility spillovers, stock markets, shock transmission, Granger causality network, spatial regression, financial crisis
    JEL: C31 C58 F01 G01 G15
    Date: 2016–05
  2. By: Thiago Christiano Silva; Michel Alexandre da Silva; Benjamin Miranda Tabak
    Abstract: We study cascade of failures in multilayer financial networks incorporating contagion feedback effects among different economic agents. We develop a flexible framework that allows for the evaluation of systemic risk in financial networks and demonstrate that the model converges to a unique fixed point. We design a financial accelerator engine to model the feedback effect between the real and the financial sectors of the economy by using contagion transmission channels such as loan defaults, bank credit crunches, deposit withdrawals, and deposit defaults. We illustrate the model using data on Brazilian bank-bank and bank-firm loans. We show that the contagion feedback effect – which accounts for second and higher-order rounds of stress propagation and is overlooked by the existing literature – is economically significant. This finding suggests that models that were developed up to date may be severely underestimating systemic risk
    Date: 2016–05
  3. By: Fabio Sabatini (Sapienza University of Rome and LCSR National Research University Higher School of Economics); Francesco Sarracino (Institut national de la statistique et des études économiques du Grand-Duché du Luxembourg (STATEC), Agence pour la normalisation et l’ économie de la connaissance (ANEC) and LCSR National Research University Higher School of Economics)
    Abstract: Online social networks, such as Facebook, disclose an unprecedented volume of personal information amplifying the occasions for social comparisons, which can be a cause of frustration. We test the hypothesis that the use of social networking sites (SNS) increases social comparisons as proxied by people’s dissatisfaction with their income and we compare the effect of SNS in Western and Eastern European countries. After controlling for the possibility of reverse causality, our results suggest that SNS users have a higher probability to compare their achievements with those of others. In Western countries, this leads individuals to a lower satisfaction with their economic conditions. The opposite holds in Eastern countries, where upward comparisons seemingly strengthen the hope that an improvement in individuals’ economic conditions will occur (so called “tunnel effect”). We conclude that SNS can be a strong engine of frustration for their users depending on the institutional and economic circumstancesKeywords: Social Networks, Social Networking Sites, Social Comparisons, Satisfaction with Income, Relative Deprivation
    JEL: D83 I31 O33 Z1 Z13
    Date: 2016–04
  4. By: Barnard, Helena; Cowan, Robin A.; Kirman, Alan P.; Müller, Moritz
    Abstract: This paper looks at the inclusion of excluded groups, notably the racial transformation of the South African university system. Both demand-side factors - are qualified black people hired as faculty? - and supply-side factors - are there enough qualified black people who can be hired as faculty? | need to be aligned. Prior evidence suggests that demand and supply both have both a psychological and a structural dimension. Affrmative action-type regulations address the structural dimension of demand, but homophily (a "love for the own") can nonetheless limit the hiring of faculty in white-dominated hiring committees. On the supply side, the weak education system limits the structural supply of quality black potential academics. But the limited hiring of black academics and resulting limited role models mean that few black people even consider an academic career. This paper presents a model of hiring (either randomly or on a homophilic basis), calibrated with data from the South African university system from the end of Apartheid. Our evidence suggests that even a relatively small reduction of homophily increases the rate at which the excluded group enters the workforce, and also that the effects of homophily and feedback from previous hires are of a similar magnitude. Nonetheless, the conclusions from the model suggest that the relatively long duration of a research career and slow growth of the national university system will result in a slow process of racial transformation.
    Keywords: universities,racial transformation,South Africa,transformation,higher education access,segregation
    JEL: O15 O30 I2
    Date: 2016
  5. By: Thiemann, Matthias; Aldegwy, Mohamed; Ibrocevic, Edin
    Abstract: While some economists argued for macro-prudential regulation pre-crisis, the macro-prudential approach and its emphasis on endogenously created systemic risk have only gained prominence post-crisis. Employing discourse and network analysis on samples of the most cited scholarly works on banking regulation as well as on systemic risk (60 sources each) from 1985 to 2014, we analyze the shift from micro to macro-prudential thinking in the shift to the post crisis period. Our analysis demonstrates that the predominance of formalism, particularly, partial equilibrium analysis along with the exclusion of historical and practitioners' styles of reasoning from banking regulatory studies impeded economists from engaging seriously with the endogenous sources of systemic risk prior to the crisis. Post-crisis, these topics became important in this discourse, but the epistemological failures of banking regulatory studies precrisis were not sufficiently recognized. Recent attempts to conceptualize and price systemic risk as a negative externality point to the persistence of formalism and equilibrium thinking, with its attending dangers of incremental innovation due to epistemological barriers constrains theoretical progress, by excluding observed phenomena, which cannot yet be accommodated in mathematical models.
    Keywords: Banking Regulation,Systemic Risk,Formalism,Equilibrium Thinking,Discourse and Citation Network Analysis
    JEL: B40 B41 G18 G28
    Date: 2016
  6. By: Enikolopov, Ruben; Makarin, Alexey; Petrova, Maria
    Abstract: Do new communication technologies, such as social media, reduce collective action problem? This paper provides evidence that penetration of VK, the dominant Russian online social network, affected protest activity during a wave of protests in Russia in 2011. As a source of exogenous variation in network penetration, we use information on the city of origin of the students who studied together with the founder of VK, controlling for the city of origin of the students who studied at the same university several years earlier or later. We find that a 10% increase in VK penetration increased the probability of a protest by 4.6%, and the number of protesters by 19%. Additional results suggest that social media has affected protest activity by reducing the costs of coordination, rather than by spreading information critical of the government. In particular, VK penetration increased pro-governmental support and reduced the number of people who were ready to participate in protests right before the protests took place. Also, cities with higher fractionalization of network users between VK and Facebook experienced fewer protests. Finally, we provide suggestive evidence that municipalities with higher VK penetration received smaller transfers from the central government after the occurrence of protests.
    Keywords: collective action; impact of technology adoption; political protests; social media
    JEL: D7 H0
    Date: 2016–05
  7. By: Rafael A. Barrio; Tzipe Govezensky; \'Elfego Ruiz-Guti\'errez; Kimmo K. Kaski
    Abstract: We present a simple dynamical model for describing trading interactions between agents in a social network by considering only two dynamical variables, namely money and goods or services, that are assumed conserved over the whole time span of the agents' trading transactions. A key feature of the model is that agent-to-agent transactions are governed by the price in units of money per goods, which is dynamically changing, and by a trust variable, which is related to the trading history of each agent. All agents are able to sell or buy, and the decision to do either has to do with the level of trust the buyer has in the seller, the price of the goods and the amount of money and goods at the disposal of the buyer. Here we show the results of extensive numerical calculations under various initial conditions in a random network of agents and compare the results with the available related data. In most cases the agreement between the model results and real data turns out to be fairly good, which allow us to draw some general conclusions as how different trading strategies could affect the distribution of wealth in different kinds of societies.
    Date: 2016–05
  8. By: Emmanuel Dhyne (Research Department, NBB and UMons); Stela Rubínová (The Graduate Institute, Geneva)
    Abstract: The capability of domestic firms to compete on foreign markets is an important indicator of a country’s economic strength and a target of many economic policies. We know that only a small share of producers sells on foreign markets and that these firms perform in many aspects differently from their purely domestic counterparts. Recent research, however, highlighted that many exporters are just trade intermediaries that do not produce the exported good and, importantly, the capability to export is supported by availability of cheap and high-quality inputs. This suggests that in order to understand an economy’s involvement in international trade and the characteristics of firms that produce for foreign markets we need to look beyond the firms that own a good when it crosses the border and acknowledge that many firms are engaged in international trade indirectly. This paper fills the gap by offering the first glimpse of the domestic supplier network that underpins exports production. To this purpose we use a new and unique dataset of yearly transactions between all domestic firms in the Belgian economy and augment it with data on firms’ characteristics and their international transactions. We show that the current picture of firms in international trade indeed misses an important share of firms. While we confirm that direct exporters are the best performing firms, we also show that they are supported by suppliers that are very good performers themselves. In fact, we find evidence of a performance premium that is increasing in the proximity to foreign demand.
    Keywords: Exporters, domestic suppliers, productivity
    JEL: D22 F24 L25
    Date: 2016–05

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