The topology of the interbank market: developments in Italy since 1990
AbstractWhen a bank defaults or stops trading in the interbank market, both a liquidity shortage in the market itself and mounting trading losses should be anticipated. To gain more insight into the way a liquidity crisis spreads, we apply network topology techniques to monthly data on deposits exchanged by Italian banks, from 1990 to 2008. Our research yields three main results: first, only a few banks are today pivotal in the redistribution of liquidity across the system, while banks close to, but outside this core circle, weigh less than they used to; secondly, the halt in operations in a second set of banks may cut off some of their counterparts from the rest of the network, with increasingly less negligible effects; finally, only 2-3 banks out of the 10 we identify as most interconnected within the network are currently also among the top 10 banks by volume of traded deposits.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 711.
Date of creation: May 2009
Date of revision:
interbank market; topology; liquidity crisis;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- G2 - Financial Economics - - Financial Institutions and Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-03 (All new papers)
- NEP-BAN-2009-06-03 (Banking)
- NEP-FMK-2009-06-03 (Financial Markets)
- NEP-HIS-2009-06-03 (Business, Economic & Financial History)
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- Fabio Caccioli & Thomas A. Catanach & J. Doyne Farmer, 2011.
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