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Interconnectedness in the interbank market

Celso Brunetti, Jeffrey Harris, Shawn Mankad and George Michailidis

Journal of Financial Economics, 2019, vol. 133, issue 2, 520-538

Abstract: We study the behavior of the interbank market around the 2008 financial crisis. Using network analysis, we study two network structures, correlation networks based on publicly traded bank returns and physical networks based on interbank lending transactions, among these public and also private banks. While the two networks behave similarly pre-crisis, during the crisis the correlation network shows an increase in interconnectedness, while the physical network highlights a marked decrease in interconnectedness. Moreover, these networks respond differently to monetary and macroeconomic shocks. Physical networks forecast liquidity problems, while correlation networks forecast financial crises.

Keywords: Network analysis; Macroprudential regulation; Financial crises; Banking sector (search for similar items in EconPapers)
JEL-codes: C1 G10 G2 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (68)

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Working Paper: Interconnectedness in the Interbank Market (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:133:y:2019:i:2:p:520-538

DOI: 10.1016/j.jfineco.2019.02.006

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