nep-net New Economics Papers
on Network Economics
Issue of 2023‒01‒02
eight papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. The Limit of Targeting in Networks By Li, Jian; Zhou, Junjie; Chen, Ying-Ju
  2. Network regressions in Stata By William Grieser; Morad Zekhnini; Jan Ditzen
  3. Fire Sales and Ex Ante Valuation of Systemic Risk: A Financial Equilibrium Networks Approach By Spiros Bougheas; Adam Spencer
  4. Cross-Sectional Dynamics Under Network Structure: Theory and Macroeconomic Applications By Marko Mlikota
  5. How does an authoritarian state co-opt its social scientists studying civil society? By Ma, Ji
  6. Counterparty choice, maturity shifts and market freezes: lessons from the e-MID interbank market By Saroyan, Susanna
  7. Trust, guilds and kinship in London, 1330-1680 By Adam, Ammaarah; Ades, Raphael; Banks, William; Benning, Canbeck; Grant, Gwyneth; Forster-Brass, Harry; McGiveron, Owen; Miller, Joe; Phelan, Daniel; Randazzo, Sebastian; Reilly, Matthew; Scott, Michael; Serban, Sebastian; Stockton, Carys; Wallis, Patrick
  8. Spatial Interaction Modeling By Oshan, Taylor M.

  1. By: Li, Jian; Zhou, Junjie; Chen, Ying-Ju
    Abstract: This paper studies the value of network-based targeting within a class of network games withstrategic complements, where the designer can target a group of seed players as first movers. We define an effectiveness index, called the relative network synergy equivalent (RNSE), to quantify the effect of a network-based targeting intervention relative to across-the-board peereffect enhancement. We show that, regardless of the targeting policies and network structures, a universal and tight upper bound for this index is √2 ≈ 1.414. This upper bound is robustto considerations of revenue maximization, costly seeding, random seeding as the alternative benchmark, and multiple stages of moves. Compared with network-based targeting, peer effect enhancing policy has the advantage of being agnostic to the network structure. In the case of small synergy, we provide comparative statics of the RNSE index concerning the network structures: fixing the targeting policy, increasing network links within the seeded group or the unseeded group will decrease the index; meanwhile, adding links across these two groups will increase the index. Our analysis sheds light on policy choices between network-based targetingand peer effect enhancing policies.
    Date: 2021–12–08
  2. By: William Grieser (Texas Christian University); Morad Zekhnini (Michigan State University); Jan Ditzen (Free University of Bozen-Bolzano)
    Abstract: Network analysis has become critical to the study of social sciences. While several Stata programs are available for analyzing network structures, programs that execute regression analysis with a network structure are currently lacking. We fill this gap by introducing the nwxtregress command. Building on spatial econometric methods (LeSage and Pace 2009), nwxtregress uses MCMC estimation to produce estimates of endogenous peer effects, as well as own-node (direct) and cross-node (indirect) partial effects, where nodes correspond to cross-sectional units of observation, such as firms, and edges correspond to the relations between nodes. Unlike existing spatial regression commands (for example, spxtregress), nwxtregress is designed to handle unbalanced panels of economic and social networks as in Grieser et al. (2021). Networks can be directed or undirected with weighted or unweighted edges, and they can be imported in a list format that does not require a shapefile or a Stata spatial weight matrix set by spmatrix. Finally, the command allows for the inclusion or exclusion of contextual effects. To improve speed, the command transforms the spatial weighting matrix into a sparse matrix. Future work will be targeted toward improving sparse matrix routines, as well as introducing a framework that allows for multiple networks.
    Date: 2022–11–30
  3. By: Spiros Bougheas; Adam Spencer
    Abstract: We introduce endogenous fire sales into a simple network model. For any given initial distribution of shocks across the network, we develop a clearing algorithm to solve for the financial equilibrium. We then utilise the results to perform ex ante risk assessment and derive risk premia for every balance sheet item where liabilities are differentiated according to priority rights. We find that risk premia reflect both idiosyncratic risk and risk of contagion (network risk). Moreover, we show that network risk magnifies the gap between the risk premia of equity and debt. We also perform comparative statics, showing that changes to the distribution of shocks and network structure can have substantial effects on the level of systemic losses.
    Keywords: Networks, Fire Sales, Systemic Risk Premia, Risk Assessment
    JEL: G33 G32 D85
    Date: 2022–11
  4. By: Marko Mlikota
    Abstract: Many environments in economics feature a cross-section of agents or units linked by a network of bilateral ties. I develop a framework to study dynamics in these cases. It consists of a vector autoregression in which innovations transmit cross-sectionally via bilateral links and which can accommodate general patterns of how network effects of higher order accumulate over time. In a first application, I take the supply chain network of the US economy as given and document how it drives the dynamics of sectoral prices. By estimating the time profile of network effects, the model allows me to go beyond steady state comparisons and study transition dynamics induced by granular shocks. As a result of different positions in the input-output network, sectors differ in both the strength and the timing of their impact on aggregates. In a second application, I discuss how to approximate cross-sectional processes by assuming that dynamics are driven by a network and in turn estimating the latter. The proposed framework offers a sparse, yet flexible and interpretable method for doing so, owing to networks` ability to summarize complex relations among units by relatively few non-zero bilateral links. Modeling industrial production growth across 44 countries, I obtain reductions in out-of-sample mean squared errors of up to 20% relative to a principal components factor model.
    Date: 2022–11
  5. By: Ma, Ji (The University of Texas at Austin)
    Abstract: What are the channels that an authoritarian state can employ to influence the research topics undesirable to the regime? I researched a Chinese scholarly network of civil society studies involving 14,088 researchers and their peer-reviewed journal articles published between 1998 and 2018. Individual and time fixed-effect models revealed that scholars who are at the center of the network closely follow the narratives of the state's policy plans and can serve as effective state agents. However, those academics who connect different intellectual communities tend to have novel ideas that deviate from the official narratives. Funding is revealed to be an ineffective direct means for co-opting individual scholars, possibly because it is routed through institutions. Combining these findings, this study proposes an initial formation of authoritarian knowledge regime that consists of (1) the state's official narrative, (2) institutionalized state sponsorship, (3) co-opted intellectuals centrally embedded in scholarly networks, and (4) intellectual brokers as sources of novel ideas.
    Date: 2022–05–31
  6. By: Saroyan, Susanna
    Abstract: We explore the impact of relationship lending on the interbank debt maturity structure of banks using data from the e-MID market covering both pre- and post-Lehman periods. We study the term structure and maturity shortening of interbank lending as an indicator of risk in times of stress. We identify bank-level and pair-level variables which are shown to contain information about the behaviour of lending relations during times of stress. Using a two-part fractional response model we show that durable liquidity relationships increase the probability of contracting term loans, but do not prevent maturity shortening during periods of acute stress. Finally, we find that lenders with concentrated short-term interbank liability structure tend to reduce their own long term lending, which confirms the roll-over risk viewpoint of term interbank market freeze. Our findings are relevant for the modeling of interbank networks under stress and the design of forward looking stress tests for the banking system.
    Keywords: Interbank markets; liquidity; market freeze; maturity shift; relationship lending; roll-over risk; interbank networks; network dynamics; counterparty risk
    JEL: E44 E58 G01 G21 G28 C25
    Date: 2022–11
  7. By: Adam, Ammaarah; Ades, Raphael; Banks, William; Benning, Canbeck; Grant, Gwyneth; Forster-Brass, Harry; McGiveron, Owen; Miller, Joe; Phelan, Daniel; Randazzo, Sebastian; Reilly, Matthew; Scott, Michael; Serban, Sebastian; Stockton, Carys; Wallis, Patrick
    Abstract: How was trust created and reinforced between the inhabitants of medieval and early modern cities? And how did the social foundations of trusting relationships change over time? Current research highlights the role of kinship, neighbourhood and associations, particularly guilds, in creating ‘relationships of trust’ and social capital in the face of high levels of migration, mortality and economic volatility, but tells us little about their relative importance or how they developed. We uncover a profound shift in the contribution of family and guilds to trust networks among the middling and elite of one of Europe’s major cities, London, over three centuries, from the 1330s to the 1680s. We examine the networks of sureties created to secure the inheritances of children whose fathers died while they were minors, surviving in the records of London’s Orphans Court. Our analysis of almost fifteen thousand networks evaluates the presence of trusting relationships connected with guild membership, family and place over several centuries. We show a profound increase in the role of kinship – a re-embedding of trust within the family - and a decline of the importance of shared guild membership in connecting Londoner’s who secured orphans’ inheritances together. We suggest these developments are best explained as a result of the impact of the Reformation on the form and intensity of sociability fostered by guilds and the enormous growth of the metropolis.
    Keywords: orphans; networks; trust; credit; London; guilds; kinship; reformation; early-modern
    JEL: N20 N13 N33 N93 Z13
    Date: 2022–11–01
  8. By: Oshan, Taylor M.
    Abstract: The concept of spatial interaction (SI) encapsulates the domain of human activities that occur between a set of locations embedded within geographical space. Data about such processes are essential for studying a wide spectrum of geographic phenomena that are important to society, such as the accessibility of services, product demand, transportation trends, and demographic dynamics. In particular, SI models seek to explore, explain, and predict aggregate movements or flows that occur across an abstract or physical network, which can be useful on its own, as well as a factor within other regional models. As the number and nature of SI modeling applications have grown, the associated theory and tools have simultaneously evolved to consider more complex spatial relationships, resulting in numerous expansions of the modeling paradigm. In this chapter, some foundations of SI modeling are first laid out before presenting a simple demonstration and then describing several extensions to the core modeling methodology.
    Date: 2022–05–30

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