A dynamic network model of the unsecured interbank lending market

Francisco Blasques (), Falk Bräuning and Iman Lelyveld

Journal of Economic Dynamics and Control, 2018, vol. 90, issue C, 310-342

Abstract: We introduce a dynamic network model of interbank lending and estimate the parameters by indirect inference using network statistics of the Dutch interbank market from February 2008 to April 2011. We find that credit-risk uncertainty and peer monitoring are significant factors in explaining the sparse core-periphery structure of the market and the presence of relationship lending. Shocks to credit-risk uncertainty lead to extended periods of low market activity, intensified by reduced peer monitoring. Moreover, changes in the central bank’s interest rate corridor have both a direct effect on the market as well as an indirect effect by changing banks’ monitoring efforts.

Keywords: Interbank liquidity; Financial networks; Credit-risk uncertainty; Monitoring; Trading relationships; Indirect inference estimation (search for similar items in EconPapers)
JEL-codes: C33 C51 E52 G01 G21 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188918301155
Full text for ScienceDirect subscribers only

Related works:
Working Paper: A dynamic network model of the unsecured interbank lending market (2016)
Working Paper: A dynamic network model of the unsecured interbank lending market (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:90:y:2018:i:c:p:310-342

DOI: 10.1016/j.jedc.2018.03.015

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().