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Network efficiency and the banking system

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  • Nicola Giocoli

Abstract

Inspired by the Coasean “market versus firm” dichotomy, we offer a new definition of efficiency by applying the notions of network cost and network efficiency as developed in complex network theory. Network analysis is relevant for every system of interconnected exchanging agents. One such system is the banking sector. It is showed that the notions hereby presented may improve upon the results of Allen and Gale’s standard model of the interbank market, where banks exchange liquidity and where troubles in a region of the market may lead to systemic collapse. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Nicola Giocoli, 2014. "Network efficiency and the banking system," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(3), pages 203-218, September.
    • Handle: RePEc:spr:inrvec:v:61:y:2014:i:3:p:203-218
    DOI: 10.1007/s12232-014-0212-x
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    References listed on IDEAS

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    6. 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.
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    Cited by:

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    Keywords

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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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