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Which bank is the "central" bank?

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Author Info

  • Bech, Morten L.
  • Chapman, James T.E.
  • Garratt, Rodney J.

Abstract

Liquidity flows through a financial network cannot be accurately described using external processing constraints alone. Behavioral aspects of participants also matter. A method similar to Google's PageRank procedure is used to produce a ranking of participants in the Canadian Large Value Transfer System in terms of their daily liquidity holdings. Accounting for differences in banks' processing speeds is essential for explaining why observed distributions of liquidity differ from the initial distributions, which are determined by the credit limits selected by banks. Delay tendencies of banks are unobservable in the data and are estimated using a Markov model.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 57 (2010)
Issue (Month): 3 (April)
Pages: 352-363

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Handle: RePEc:eee:moneco:v:57:y:2010:i:3:p:352-363

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Web page: http://www.elsevier.com/locate/inca/505566

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Keywords: Payment systems Networks Liquidity;

References

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  1. Morten L. Bech & Rod Garratt, 2006. "Illiquidity in the interbank payment system following wide-scale disruptions," Staff Reports 239, Federal Reserve Bank of New York.
  2. Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market Liquidity and Funding Liquidity," NBER Working Papers 12939, National Bureau of Economic Research, Inc.
  3. John Geweke, 1999. "Using simulation methods for bayesian econometric models: inference, development,and communication," Econometric Reviews, Taylor & Francis Journals, vol. 18(1), pages 1-73.
  4. Michael Boss & Helmut Elsinger & Martin Summer & Stefan Thurner, 2004. "An Empirical Analysis of the Network Structure of the Austrian Interbank Market," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 7, pages 77-87.
  5. Antoine Martin & James McAndrews, 2007. "Liquidity-saving mechanisms," Staff Reports 282, Federal Reserve Bank of New York.
  6. Morten L. Bech & Bart Hobijn, 2007. "Technology Diffusion within Central Banking: The Case of Real-Time Gross Settlement," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 147-181, September.
  7. Leo Katz, 1953. "A new status index derived from sociometric analysis," Psychometrika, Springer, vol. 18(1), pages 39-43, March.
  8. Douglas M. Gale & Shachar Kariv, 2007. "Financial Networks," American Economic Review, American Economic Association, vol. 97(2), pages 99-103, May.
  9. Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007. "The topology of interbank payment flows," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 379(1), pages 317-333.
  10. Amihud, Yakov & Mendelson, Haim & Pedersen, Lasse Heje, 2005. "Liquidity and Asset Prices," MPRA Paper 24768, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Jason Allen & James Chapman & Federico Echenique & Matthew Shum, 2012. "Efficiency and Bargaining Power in the Interbank Loan Market," Working Papers 12-29, Bank of Canada.
  2. Martinez-Jaramillo, Serafin & Alexandrova-Kabadjova, Biliana & Bravo-Benitez, Bernardo & Solórzano-Margain, Juan Pablo, 2014. "An empirical study of the Mexican banking system’s network and its implications for systemic risk," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 242-265.
  3. Henry Penikas & Yulia Titova, 2012. "Modeling Policy Response to Global Systemically Important Banks Regulation," HSE Working papers WP BRP 02/FE/2012, National Research University Higher School of Economics.
  4. Agustín Saade Ospina, . "Estructura de red del Mercado Electrónico Colombiano (MEC) e identificación de agentes sistémicos según criterios de centralidad," Temas de Estabilidad Financiera 054, Banco de la Republica de Colombia.

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