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on Network Economics |
| By: | Chang, Jin-Wook |
| Abstract: | This paper investigates contagion in financial networks through both debt and collateral markets. Payment from a collateralized debt contract depends not only on the borrower's balance sheet but also on the price of the underlying collateral. I show that the existence of the collateral channel of contagion amplifies the contagion from the counterparty channel, and this additional channel generates different patterns of contagion for a given network structure. If the negative liquidity shock is small, then having more connections make the network safer as contagion through debt channel is minimized by diversified exposures while contagion through collateral channel is limited. However, if the liquidity shock is large, then having more connections make the network more vulnerable as contagions through both debt and collateral channels are maximized by more exposures. The most novel and surprising result is that the ring network is safer than the complete network when the shock is large. This is because the ring network minimizes the contagion through collateral channel while maximizing the contagion through debt channel. The model also provides the minimum collateral-debt ratio (haircut) to attain robust macro-prudential state for a given network structure and aggregate shock. |
| Keywords: | collateral, contagion, debt, financial networks, interconnectedness, systemic risk |
| JEL: | D52 D53 E44 G23 G24 G28 |
| Date: | 2021–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111131&r= |
| By: | Filippo Santi; Giorgia Giovannetti; Margherita Velucchi |
| Abstract: | We use the instruments of the social network analysis to revisit the relationship between international migration and Foreign Direct Investment (FDI) flows in the period between 2000 and 2015. Applying a multilevel mixed estimator inspired to the gravity literature, we test how and to what extent the structure of the international migrants’ network contributes to bilateral FDI flows. We find that the inclusion of network level statistics exposes a much larger degree of complexity in the relationship between international migration and investments. Testing the assumption that migrants networks act as preferential channel for information with their homeland, we find evidence that a more diverse immigrant community in investing countries could “perturb†the flow of information at bilateral level, de facto translating into lower bilateral FDI |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2021_17.rdf&r= |
| By: | Ayca Topaloglu Bozkurt; Suheyla Ozyildirim |
| Abstract: | In this study we document the topology of banks’ commercial loan network in Turkey using more than 44 million loan observations between 2007 and 2016 on a quarterly basis. To our knowledge, we study the largest financial network which includes all bank-firm loan transactions, i.e., population data that has not been studied up to now. First, we construct a network among banks resulting from their common borrowing firms. Second, we develop a novel weighted degree measure based on the share within the total banking sector of the loan volumes that banks lend to the same firms. Third, we empirically investigate the relationship between the credit riskiness of banks and their weighted degree centrality. Our empirical findings suggest that the credit riskiness of banks decreases with the weighted degree centrality of the banks emerging from lending to common borrowing firms. The impact remains significant after controlling for bank loan size, liquidity and even controlling for multiple lending. Finally, analysis based on micro-level stratifications where the loan size, collateral, multiple borrowings of firms and banks size are taken into account also supports our findings that there is a negative association between loan network centrality and credit risk. |
| Keywords: | Bank-loan network, Bipartite network, Projected network, Weighted degree centrality, Multiple lending, Credit riskiness |
| JEL: | G21 G01 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:2133&r= |
| By: | Phu Nguyen-Van; Anne Stenger; Tuyen Tiet |
| Abstract: | Based on a meta-analysis, this paper highlights the strength and relevance of several social incentive factors concerning pro-environmental behaviors, including social influence, network factors (like network size, network connection and leadership), trust in others, and trust in institutions. Firstly, our results suggest that social influence is necessary for the emergence of pro-environmental behaviors. More specifically, an internal social influence (i.e., motivating people to change their perceptions and attitudes) is essential to promote pro-environmental behaviors. Secondly, network connection encourages pro-environmental behaviors, meaning that the effectiveness of a conservation policy can be improved if connections among individuals are increased. Finally, trust in institutions can dictate individual behaviors to shape policy design and generate desired policy outcomes. |
| Keywords: | Meta-analysis; Network; Pro-environmental behavior; Social influence; Social incentive; Trust. |
| JEL: | D91 Q50 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2021-52&r= |
| By: | Feng, Shuaizhang; Kim, Jun Hyung; Yang, Zhe |
| Abstract: | Despite extensive literature on peer effects, the role of peers on personality skill development remains poorly understood. We fill this gap by investigating the effects of having disadvantaged primary school peers, generated by random classroom assignment and parental migration for employment. We find that having disadvantaged peers significantly lowers conscientiousness, agreeableness, emotional stability, and social skill. The implied effects of a 10-15 percentage point change in the classroom proportion of disadvantaged peers are comparable to the effects of popular early childhood interventions. Furthermore, we find suggestive evidence that these effects are driven by the peers' personality skills. |
| Keywords: | peer effect,noncognitive skill,left-behind children,human capital,Big-5 |
| JEL: | I21 D62 O15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1004&r= |
| By: | Nils Bertschinger; Axel A. Araneda |
| Abstract: | In this paper, we examine the interlinkages among firms through a financial network where cross-holdings on both equity and debt are allowed. We relate mathematically the correlation among equities with the unconditional correlation of the assets, the values of their business assets and the sensitivity of the network, particularly the $\Delta$-Greek. We noticed also this relation is independent of the Equities level. Besides, for the two-firms case, we analytically demonstrate that the equities correlation is always higher than the correlation of the assets; showing this issue by numerical illustrations. Finally, we study the relation between equity correlations and asset prices, where the model arrives to an increase in the former due to a fall in the assets. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.04824&r= |
| By: | Marta Silva (Banco de Portugal); Jose Garcia-Louzao (Bank of Lithuania) |
| Abstract: | The use of social contacts in the labor market is widespread. This paper investigates the impact of personal connections on hiring probabilities and re-employment outcomes of displaced workers in Portugal. We rely on rich matched employer-employee data to define personal connections that arise from interactions at the workplace. Our empirical strategy exploits firm closures to select workers who are exogenously forced to search for a new job and leverages variation across displaced workers with direct connections to prospective employers. The hiring analysis indicates that displaced workers with a direct link to a firm through a former coworker are roughly three times more likely to be hired compared to workers displaced from the same closing event who lack such a tie. However, we find that the effect varies according to the type of connection as well as firms’ similarity. Finally, we show that successful displaced workers with a connection in the hiring firm have higher entry-level wages and enjoy greater job security although these advantages disappear over time. |
| Keywords: | Job Displacement, Coworker Networks, Re-Employment |
| JEL: | J23 J63 L14 |
| Date: | 2021–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:lie:wpaper:95&r= |
| By: | Anne-Caroline Hüser; Caterina Lepore; Luitgard Veraart |
| Abstract: | We examine how the repo market operates during liquidity stress by applying network analysis to novel transaction-level data of the overnight gilt repo market including the COVID-19 crisis. During this crisis, the repo network becomes more connected, with most institutions relying on existing trade relationships to transact. There are however significant changes in the repo volumes and spreads during the stress relative to normal times. We find a significant increase in volumes traded in the cleared segment of the market. This reflects a preference for dealers and banks to transact in the cleared rather than the bilateral segment. Funding decreases towards non-banks, only increasing for hedge funds. Further, spreads are higher when dealers and banks lend to rather than borrow from non-banks. Our results can inform the policy debate around the behaviour of banks and non-banks in recent liquidity stress and on widening participation in CCPs by nonbanks. |
| Date: | 2021–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/267&r= |