Interconnectedness in the interbank market

By Celso Brunetti, Jeffrey H. Harris, Shawn Mankad, George Michailidis. Journal of Financial Economics, 2015

174 citations recorded by the source corpus.

We study the behavior of the interbank market before, during and after the 2008 financial crisis. Leveraging recent advances in network analysis, we study two network structures, a correlation network based on publicly traded bank returns, and a physical network based on interbank lending transactions. While the two networks behave similarly pre-crisis, during the crisis the correlation network shows an increase in interconnectedness while the physical network highlights a marked decrease in interconnectedness. Moreover, these networks respond differently to monetary and macroeconomic shocks. Physical networks forecast liquidity problems while correlation networks forecast financial crises.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/f75c3c46358dd6e86916d20af29082c9692d0fd3

Citations in the corpus

• Interconnectedness in the global financial market (2017, unknown): “Furthermore, alternative models have been introduced to quantify statistical interconnectedness, such as the Variance Decomposition method (Diebold and Yilmaz, 2014) and non-negative matrix factorization method (Brunetti et al., 2015).”