Contingent Linear Financial Networks

Bomin Jiang, Roberto Rigobon and Munther A. Dahleh

No 26814, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we develop a methodology to estimate hidden linear networks when only an aggregate outcome is observed. The aggregate observable variable is a linear mixture of the different networks and it is assumed that each network corresponds to the transmission mechanism of different shocks. We implement the methodology to estimate financial networks among US financial institutions. Credit Default Swap rates are the observable variable and we show that more than one network is needed to understand the dynamic behavior exhibited in the data.

JEL-codes: E0 E44 G1 G21 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-mac and nep-net
Note: IFM
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Citations: View citations in EconPapers (1)

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