A functional perspective to financial networks

Edoardo Gaffeo () and Massimo Molinari

No 2016/06, DEM Working Papers from Department of Economics and Management

Abstract: The financial sector is a critical component of any economic system, as it delivers key qualitative asset transformation services in terms of liquidity, maturity and volume. Although these functions could in principle be carried out separately by specialized actors, in the end it is their systemic co-evolution the determines how the aggregate economy performs and withstands disruptions. In this paper we argue that a functional perspective to financial intermediation can be usefully employed to investigate the functioning of financial networks. We do this in two steps. First, we use previously unreleased data to show that focusing on the economic functions performed over time by the different institutions exchanging funds in an interbank market can be informative, even if the underlying topological structure of their relations remains constant. Sec- ond, a set of alternative artificial histories are generated and stress-tested by using real data as a calibration base, with the aim of performing counterfactual welfare comparisons among different topological structures.

Keywords: Financial Networks; Functional Perspective; Money-Center Banks (search for similar items in EconPapers)
JEL-codes: C63 D85 G21 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-net
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Related works:
Journal Article: A functional perspective on financial networks (2018)
Working Paper: A functional perspective on financial networks (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:trn:utwprg:2016/06

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