Intermediaries’ Substitutability and Financial Network Resilience: A Hyperstructure Approach

Olivier Accominotti, Delio Lucena-Piquero and Stefano Ugolini ()
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Delio Lucena-Piquero: LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - Institut d'Études Politiques [IEP] - Toulouse - ENSFEA - École Nationale Supérieure de Formation de l'Enseignement Agricole de Toulouse-Auzeville
Stefano Ugolini: LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - Institut d'Études Politiques [IEP] - Toulouse - ENSFEA - École Nationale Supérieure de Formation de l'Enseignement Agricole de Toulouse-Auzeville

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Abstract: This article studies the impact of intermediaries' disappearance on firms' access to the sterling money market during the first globalization era of 1880-1914. We propose a new methodology to assess intermediaries' substitutability in financial networks featuring higher-order structures (credit intermediation chains). We represent the financial network as a hyperstructure and each credit intermediation chain as a hyperedge. This approach allows us to assess how the failure of intermediaries affects network connectivity. We apply this methodology to a unique dataset documenting the network structure of the sterling money market in the year 1906. Our results reveal that the failure of individual money market actors could only cause limited damage to the network as intermediaries were highly substitutable. These findings suggest that an international financial network without highly systemic nodes can emerge even at a time of global economic integration.

Keywords: Financial networks; Systemic risk; Hypergraphs; Intermediation chains; Bills of exchange; Hyperstructures (search for similar items in EconPapers)
Date: 2023-08
New Economics Papers: this item is included in nep-fdg and nep-net
Note: View the original document on HAL open archive server: https://hal.science/hal-04160805v2
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Published in Journal of Economic Dynamics and Control, 2023, 153, pp.104700. ⟨10.1016/j.jedc.2023.104700⟩

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Journal Article: Intermediaries’ substitutability and financial network resilience: A hyperstructure approach (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04160805

DOI: 10.1016/j.jedc.2023.104700

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