Topology of Complex Networks and Demand of Intraday Liquidity: Based on the Real-Time Gross Settlement System

Tong Mu () and He Yi
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Tong Mu: Collaborative Innovation Center of Financial Security, Southwestern University of Finance and Economics, Chengdu, China
He Yi: School of International Business, Southwestern University of Finance and Economics, Chengdu, China

Central European Economic Journal, 2017, vol. 2, issue 49, 50-61

Abstract: Based on the payments and settlement system, the influence of the topology of capital flow networks on the extra short-term liquidity demand is investigated. Through modelling the circulating mechanism of liquidity in a network, its different influencing factors are analysed. The factors relating to the strength of nodes and leakage of liquidity that influences the liquidity demands of real-time settlements are studied from the perspective of both the system and members, using different simulation methods. The results show that strength will lead the member’s liquidity demand to increase but the strength distribution will lead the system’s liquidity demand to decrease, in cases with no leakage effect or unchanged leakage effect. The liquidity demand of the entire system is positive compared to the amount of leakage effect but uncorrelated to the distribution of the leakage effect among members, if the effect of strength distribution is unchanged. If the effects of strength, strength distribution and leakage are changed together, the latter is the dominant factor that influences the liquidity demand of both system and members. The above findings are useful for the management and supervision of short-term liquidity demand in complex financial systems, and for liquidity risk management and liquidity rescue policymaking.

Keywords: network structure; intraday liquidity; real-time settlement; liquidity management (search for similar items in EconPapers)
JEL-codes: C15 G21 G32 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ceuecj:v:2:y:2017:i:49:p:50-61:n:4

DOI: 10.1515/ceej-2017-0010

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