Core-Periphery Structure in the Overnight Money Market: Evidence from the e-MID Trading Platform
AbstractWe explore the network topology arising from a dataset of the overnight interbank transactions on the e-MID trading platform from January 1999 to December 2010. In order to shed light on the hierarchical structure of the banking system, we estimate different versions of a core-periphery model. Our main findings are: (1) A core-periphery structure provides a better fit for these interbank data than alternative network models, (2) the identified core is quite stable over time, consisting of roughly 28% of all banks before the global financial crisis (GFC) and 23% afterwards, (3) the majority of core banks can be classified as intermediaries, i.e. as banks both borrowing and lending money, (4) allowing for asymmetric `coreness’ with respect to lending and borrowing considerably improves the fit, and reveals more concentration in borrowing than lending activity of money center banks. During the financial crisis of 2008, the reduction of interbank lending was mainly due to core banks’ reducing their numbers of active outgoing links
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1759.
Length: 60 pages
Date of creation: Mar 2012
Date of revision:
interbank market; network models; systemic risk; financial crisis;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G01 - Financial Economics - - General - - - Financial Crises
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cocco, João F. & Gomes, Francisco J. & Martins, Nuno C., 2009. "Lending relationships in the interbank market," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 24-48, January.
- X. Freixas & B. Parigi & J-C. Rochet, 2000.
"Systemic Risk, Interbank Relations and Liquidity Provision by theCentral Bank,"
DNB Staff Reports (discontinued)
47, Netherlands Central Bank.
- Xavier Freixas & Bruno M. Parigi & Jean-Charles Rochet, 2000. "Systemic risk, interbank relations, and liquidity provision by the central bank," Proceedings, Federal Reserve Bank of Cleveland, pages 611-640.
- Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-38, August.
- Xavier Freixas & Bruno Parigi & Jean Charles Rochet, 1998. "Systemic risk, interbank relations and liquidity provision by the Central Bank," Economics Working Papers 440, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 1999.
- Freixas, Xavier & Parigi, Bruno & Rochet, Jean Charles, 1999. "Systemic Risk, Interbank Relations and Liquidity Provision by the Central Bank," CEPR Discussion Papers 2325, C.E.P.R. Discussion Papers.
- Morten L. Bech & Enghin Atalay, 2008.
"The topology of the federal funds market,"
354, Federal Reserve Bank of New York.
- Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
- 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.
- Ana Salomé García Muñiz & Antonio Morillas Raya & Carmen Ramos Carvajal, 2011. "Core periphery valued models in input‐output field: A scope from network theory," Papers in Regional Science, Wiley Blackwell, vol. 90(1), pages 111-121, 03.
- De Bandt, Olivier & Hartmann, Philipp, 2000.
"Systemic risk: A survey,"
Working Paper Series
0035, European Central Bank.
- Trichet, J.C., 2011. "Intellectual challenges to financial stability analysis in the era of macroprudential oversight," Financial Stability Review, Banque de France, issue 15, pages 139-149, February.
- G. De Masi & G. Iori & G. Caldarelli, 2006.
"A fitness model for the Italian Interbank Money Market,"
- de Masi, G. & Iori, G. & Caldarelli, G., 2006. "A fitness model for the Italian interbank money market," Working Papers 06/08, Department of Economics, City University London.
- Iori, G. & Masi, G. D. & Precup, O. V. & Gabbi, G. & Caldarelli, G., 2005.
"A network analysis of the Italian oversight money market,"
05/05, Department of Economics, City University London.
- Iori, Giulia & De Masi, Giulia & Precup, Ovidiu Vasile & Gabbi, Giampaolo & Caldarelli, Guido, 2008. "A network analysis of the Italian overnight money market," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 259-278, January.
- Sheri Markose & Simone Giansante & Mateusz Gatkowski & Ali Rais Shaghaghi, 2010.
"Too Interconnected To Fail: Financial Contagion and Systemic Risk In Network Model of CDS and Other Credit Enhancement Obligations of US Banks,"
- Sheri Markose & Simone Giansante & Mateusz Gatkowski & Ali Rais Shaghaghi, 2010. "Too Interconnected To Fail: Financial Contagion and Systemic Risk in Network Model of CDS and Other Credit Enhancement Obligations of US Banks," Economics Discussion Papers 683, University of Essex, Department of Economics.
- George Sheldon & Martin Maurer, 1998. "Interbank Lending and Systemic Risk: An Empirical Analysis for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 134(IV), pages 685-704, December.
- Mistrulli, Paolo Emilio, 2011.
"Assessing financial contagion in the interbank market: Maximum entropy versus observed interbank lending patterns,"
Journal of Banking & Finance,
Elsevier, vol. 35(5), pages 1114-1127, May.
- Paolo Emilio Mistrulli, 2007. "Assessing financial contagion in the interbank market: Maximum entropy versus observed interbank lending patterns," Temi di discussione (Economic working papers) 641, Bank of Italy, Economic Research and International Relations Area.
- Michael Boss & Helmut Elsinger & Martin Summer & Stefan Thurner, 2004. "Network topology of the interbank market," Quantitative Finance, Taylor & Francis Journals, vol. 4(6), pages 677-684.
- Daniel Fricke & Thomas Lux, 2013. "On the Distribution of Links in the Interbank Network: Evidence from the e-Mid Overnight Money Market," Kiel Working Papers 1819, Kiel Institute for the World Economy.
- Daniel Fricke & Karl Finger & Thomas Lux, 2013. "On Assortative and Disassortative Mixing Scale-Free Networks: The Case of Interbank Credit Networks," Kiel Working Papers 1830, Kiel Institute for the World Economy.
- Daniel Fricke, 2012.
"Trading Strategies in the Overnight Money Market: Correlations and Clustering on the e-MID Trading Platform,"
Kiel Working Papers
1766, Kiel Institute for the World Economy.
- Fricke, Daniel, 2012. "Trading strategies in the overnight money market: Correlations and clustering on the e-MID trading platform," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(24), pages 6528-6542.
- Sheri M. Markose, 2012. "Systemic Risk from Global Financial Derivatives: A Network Analysis of Contagion and Its Mitigation with Super-Spreader Tax," IMF Working Papers 12/282, International Monetary Fund.
- Pritsker, Matthew, 2013. "Knightian uncertainty and interbank lending," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 85-105.
- Vaclav Hausenblas & Ivana Kubicova & Jitka Lesanovska, 2012. "Contagion Risk in the Czech Financial System: A Network Analysis and Simulation Approach," Working Papers 2012/14, Czech National Bank, Research Department.
- Lee, Seung Hwan, 2013. "Systemic liquidity shortages and interbank network structures," Journal of Financial Stability, Elsevier, vol. 9(1), pages 1-12.
- Matthias Raddant, 2012.
"Structure in the Italian Overnight Loan Market,"
Kiel Working Papers
1772, Kiel Institute for the World Economy.
- Fariba Karimi & Matthias Raddant, 2013.
"Cascades in real interbank markets,"
- Mattia Montagna & Thomas Lux, 2013. "Hubs and resilience: towards more realistic models of the interbank markets," Kiel Working Papers 1826, Kiel Institute for the World Economy.
- Leonardo Bargigli & Giovanni Di Iasio & Luigi Infante & Fabrizio Lillo & Federico Pierobon, 2013.
"The Multiplex Structure of Interbank Networks,"
Working Papers - Economics
wp2013_26.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
- Iman van Lelyveld & Daan in 't Veld, 2012. "Finding the core: Network structure in interbank markets," DNB Working Papers 348, Netherlands Central Bank, Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).
If references are entirely missing, you can add them using this form.