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Spatial Dependence and Data-Driven Networks of International Banks

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  • Ben Craig
  • Martín Saldías

Abstract

This paper computes data-driven correlation networks based on the stock returns of international banks and conducts a comprehensive analysis of their topological properties. We first apply spatial-dependence methods to filter the effects of strong common factors and a thresholding procedure to select the significant bilateral correlations. The analysis of topological characteristics of the resulting correlation networks shows many common features that have been documented in the recent literature but were obtained with private information on banks' exposures, including rich and hierarchical structures, based on but not limited to geographical proximity, small world features, regional homophily, and a core-periphery structure.

Suggested Citation

  • Ben Craig & Martín Saldías, 2016. "Spatial Dependence and Data-Driven Networks of International Banks," IMF Working Papers 2016/184, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2016/184
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    References listed on IDEAS

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    Cited by:

    1. Torri, Gabriele & Giacometti, Rosella & Paterlini, Sandra, 2018. "Robust and sparse banking network estimation," European Journal of Operational Research, Elsevier, vol. 270(1), pages 51-65.

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    More about this item

    Keywords

    Banking; Spatial models; International banking; Vector autoregression; Stock markets; WP; correlation matrix; hierarchical structure; graph theory;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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