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Endogenous network of firms and systemic risk

Author

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  • Ma, Qianting
  • He, Jianmin
  • Li, Shouwei

Abstract

We construct an endogenous network characterized by commercial credit relationships connecting the upstream and downstream firms. Simulation results indicate that the endogenous network model displays a scale-free property which exists in real-world firm systems. In terms of the network structure, with the expansion of the scale of network nodes, the systemic risk increases significantly, while the heterogeneities of network nodes have no effect on systemic risk. As for firm micro-behaviors, including the selection range of trading partners, actual output, labor requirement, price of intermediate products and employee salaries, increase of all these parameters will lead to higher systemic risk.

Suggested Citation

  • Ma, Qianting & He, Jianmin & Li, Shouwei, 2018. "Endogenous network of firms and systemic risk," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 492(C), pages 2273-2280.
    • Handle: RePEc:eee:phsmap:v:492:y:2018:i:c:p:2273-2280
    DOI: 10.1016/j.physa.2017.11.141
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    Cited by:

    1. Jiang, Shanshan & Fan, Hong, 2018. "Credit risk contagion coupling with sentiment contagion," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 512(C), pages 186-202.
    2. Jiang, Shanshan & Fan, Hong, 2021. "Systemic risk in the interbank market with overlapping portfolios and cross-ownership of the subordinated debts," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 562(C).

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