nep-net New Economics Papers
on Network Economics
Issue of 2021‒03‒15
nine papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Global realignment in financial market dynamics: Evidence from ETF networks By Billio, Monica; Lo, Andrew W.; Pelizzon, Loriana; Getmansky, Mila; Zareei, Abalfazl
  2. ‘Like with Like’ or ‘Do Like’? Modelling Peer Effects in The Classroom By Giovanni Abbiati; Jonathan Pratschke
  3. Network Cluster-Robust Inference By Michael P. Leung
  4. The Origination and Distribution of Money Market Instruments: Sterling Bills of Exchange during the First Globalization By Olivier Accominotti; Delio Lucena-Piquero; Stefano Ugolini
  5. Money Flow Network Among Firms' Accounts in a Regional Bank of Japan By FUJIWARA Yoshi; INOUE Hiroyasu; YAMAGUCHI Takayuki; AOYAMA Hideaki; TANAKA Takuma; KIKUCHI Kentaro
  6. The role of proximity relations in the integration process into the network: an analysis of CEOs’ life narratives By Laura Sabbado; Maud Daniel; Caroline Ruiller; Emmanuelle Fromont; Roselyne Crambert
  7. The Physics of Financial Networks By Marco Bardoscia; Paolo Barucca; Stefano Battiston; Fabio Caccioli; Giulio Cimini; Diego Garlaschelli; Fabio Saracco; Tiziano Squartini; Guido Caldarelli
  8. Extracting Complements and Substitutes from Sales Data: A Network Perspective By Yu Tian; Sebastian Lautz; Alisdiar Wallis; Renaud Lambiotte
  9. The Distinct Impact of Information and Incentives on Cheating By Julien Benistant; Fabio Galeotti; Marie Claire Villeval

  1. By: Billio, Monica; Lo, Andrew W.; Pelizzon, Loriana; Getmansky, Mila; Zareei, Abalfazl
    Abstract: The centrality of the United States in the global financial system is taken for granted, but its response to recent political and epidemiological events has suggested that China now holds a comparable position. Using minute-by-minute data from 2012 to 2020 on the financial performance of twelve country-specific exchange-traded funds, we construct daily snapshots of the global financial network and analyze them for the centrality and connectedness of each country in our sample. We find evidence that the U.S. was central to the global financial system into 2018, but that the U.S.-China trade war of 2018-2019 diminished its centrality, and the Covid-19 outbreak of 2019-2020 increased the centrality of China. These indicators may be the first signals that the global financial system is moving from a unipolar to a bipolar world.
    Keywords: Network theory,Centrality,High Frequency Data,ETFs,Financial Crises,Covid-19,International Finance
    Date: 2021
  2. By: Giovanni Abbiati (Università di Milano); Jonathan Pratschke (Università di Napoli Federico II and CSEF.)
    Abstract: This paper reviews the recent peer effects literature and showcases the simultaneous autoregressive model, which integrates aspects of multiple regression modelling, instrumental variables, social network analysis and longitudinal analysis. It describes state of the art techniques for making inferences using survey data, clarifies the assumptions made by statistical models and provides further evidence on the impact of peers in education. The paper includes a case study using data from an Italian survey to study peer effects in relation to university enrollment. The model includes components that control for endogenous, exogenous and correlated peer effects as well as different forms of selection. The evidence presented in the paper suggests that endogenous peer effects have a statistically and substantively significant influence on the probability of enrolling at university, measured over one year. Sensitivity tests suggest that the results of the estimation are robust to confounding due to latent homophily and other potential sources of bias.
    Keywords: Peer effects; Simultaneous auto-regressive models; Education; Social inequalities; University enrollment; Italy.
    Date: 2021–02–03
  3. By: Michael P. Leung
    Abstract: Since network data commonly consists of observations on a single large network, researchers often partition the network into clusters in order to apply cluster-robust inference methods. All existing such methods require clusters to be asymptotically independent. We prove that for this requirement to hold, under certain conditions, it is necessary and sufficient for clusters to have low conductance, the ratio of edge boundary size to volume, which yields a measure of cluster quality. We show in simulations that, for important classes of networks lacking low-conductance clusters, cluster-robust methods can exhibit substantial size distortion, whereas for networks with such clusters, they outperform HAC estimators. To assess the existence of low-conductance clusters and construct them, we draw on results in spectral graph theory showing a close connection between conductance and the spectrum of the graph Laplacian. Based on these results, we propose to use the spectrum to compute the number of low-conductance clusters and spectral clustering to compute the clusters. We illustrate our results and proposed methods in simulations and empirical applications.
    Date: 2021–03
  4. By: Olivier Accominotti (LSE); Delio Lucena-Piquero (LEREPS); Stefano Ugolini (LEREPS)
    Abstract: This paper presents a detailed analysis of how liquid money market instruments -- sterling bills of exchange -- were produced during the first globalisation. We rely on a unique data set that reports systematic information on all 23,493 bills re-discounted by the Bank of England in the year 1906. Using descriptive statistics and network analysis, we reconstruct the complete network of linkages between agents involved in the origination and distribution of these bills. Our analysis reveals the truly global dimension of the London bill market before the First World War and underscores the crucial role played by London intermediaries (acceptors and discounters) in overcoming information asymmetries between borrowers and lenders on this market. The complex industrial organisation of the London money market ensured that risky private debts could be transformed into extremely liquid and safe monetary instruments traded throughout the global financial system.
    Date: 2021–03
  5. By: FUJIWARA Yoshi; INOUE Hiroyasu; YAMAGUCHI Takayuki; AOYAMA Hideaki; TANAKA Takuma; KIKUCHI Kentaro
    Abstract: In this study, we investigate the flow of money among bank accounts possessed by firms in a single region by employing an exhaustive list of all the bank transfers in a regional bank in Japan, to clarify how the network of money flow is related to the economic activities of the firms. The network statistics and structures are examined and shown to be similar to those of a nationwide production network. Specifically, the bowtie analysis indicates what we refer to as a "walnut" structure with core and upstream/downstream components. To quantify the location of an individual account in the network, we used the Hodge decomposition method and found that the Hodge potential of the account has a significant correlation to its position in the bowtie structure as well as to its net flow of incoming and outgoing money and links, namely the net demand/supply of individual accounts. In addition, we used non-negative matrix factorization to identify important factors underlying the entire flow of money; it can be interpreted that these factors are associated with regional economic activities. One factor has a feature whereby the remittance source is localized to the largest city in the region, while the destination is scattered. The other factors correspond to the economic activities specific to different local places. This study serves as a basis for further investigation on the relationship between money flow and economic activities of firms.
    Date: 2021–01
  6. By: Laura Sabbado (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Maud Daniel; Caroline Ruiller; Emmanuelle Fromont; Roselyne Crambert
    Abstract: This article looks at the collaboration relations of CEOs during different phases of the integration process into a network by using various proximity dimensions. Based on the life narratives of 21 CEO members belonging to a regional network, our study underlines that three integration phases exist, within which different proximity forms are mobilised. Whereas, institutional, personal and social proximities are significant during the entry phase, temporary geographical and cognitive proximities appear to be essential for building collaboration. Moreover, if social and personal dimensions play essential roles in starting collaborations, we note that social proximity remains less decisive for joint collaborative projects. These results enrich recent debates about the dimensions of proximity. They open lines of thinking about ways to encourage the integration of new members.
    Keywords: qualitative analysis,life narrative,network dynamics,Proximity,Network dynamics,Life narrative,Qualitative analysis
    Date: 2021
  7. By: Marco Bardoscia; Paolo Barucca; Stefano Battiston; Fabio Caccioli; Giulio Cimini; Diego Garlaschelli; Fabio Saracco; Tiziano Squartini; Guido Caldarelli
    Abstract: The field of Financial Networks is a paramount example of the novel applications of Statistical Physics that have made possible by the present data revolution. As the total value of the global financial market has vastly outgrown the value of the real economy, financial institutions on this planet have created a web of interactions whose size and topology calls for a quantitative analysis by means of Complex Networks. Financial Networks are not only a playground for the use of basic tools of statistical physics as ensemble representation and entropy maximization; rather, their particular dynamics and evolution triggered theoretical advancements as the definition of DebtRank to measure the impact and diffusion of shocks in the whole systems. In this review we present the state of the art in this field, starting from the different definitions of financial networks (based either on loans, on assets ownership, on contracts involving several parties -- such as credit default swaps, to multiplex representation when firms are introduced in the game and a link with real economy is drawn) and then discussing the various dynamics of financial contagion as well as applications in financial network inference and validation. We believe that this analysis is particularly timely since financial stability as well as recent innovations in climate finance, once properly analysed and understood in terms of complex network theory, can play a pivotal role in the transformation of our society towards a more sustainable world.
    Date: 2021–03
  8. By: Yu Tian; Sebastian Lautz; Alisdiar Wallis; Renaud Lambiotte
    Abstract: The complementarity and substitutability between products are essential concepts in retail and marketing. Qualitatively, two products are said to be substitutable if a customer can replace one product by the other, while they are complementary if they tend to be bought together. In this article, we take a network perspective to help automatically identify complements and substitutes from sales transaction data. Starting from a bipartite product-purchase network representation, with both transaction nodes and product nodes, we develop appropriate null models to infer significant relations, either complements or substitutes, between products, and design measures based on random walks to quantify their importance. The resulting unipartite networks between products are then analysed with community detection methods, in order to find groups of similar products for the different types of relationships. The results are validated by combining observations from a real-world basket dataset with the existing product hierarchy, as well as a large-scale flavour compound and recipe dataset.
    Date: 2021–03
  9. By: Julien Benistant (Univ Lyon, CNRS, ISC Marc Jeannerod, UMR 5229, Bron, France); Fabio Galeotti (Univ Lyon, CNRS, GATE, UMR 5824, F-69130 Ecully, France); Marie Claire Villeval (Univ Lyon, CNRS, GATE, UMR 5824, F-69130 Ecully, France; IZA, Bonn, Germany)
    Abstract: We study a dynamic variant of the die-under-the-cup task where players can repeatedly misreport the outcomes of consecutive die rolls to earn more money, either under a noncompetitive piece rate scheme or in a two-player competitive tournament. In this dynamic setting we test (i) whether giving continuous feedback (vs. final ex post feedback) on the opponent’s reported outcome to both players encourages cheating behavior, and (ii) to what extent this influence depends on the incentive scheme in use (piece rate vs. tournament). We also vary whether the opponent is able to cheat or not. We find that people lie more when placed in a competitive rather than a non-competitive setting, but only if both players can cheat in the tournament. Continuous feedback on the counterpart’s reports increases cheating under the piece-rate scheme but not in a competitive setting. Our results provide new insights on the role that feedback plays on cheating behavior in dynamic settings under different payment schemes, and shed liht on the origins of the effect of competition on dishonesty.
    Keywords: Dishonesty, feedback, peer effects, competitive incentives, experiment
    JEL: C92 M52 D83
    Date: 2021

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