Kiel Working Papers, Kiel Institute for World Economics
No 1759:
Core-Periphery Structure in the Overnight Money Market: Evidence from the e-MID Trading Platform
Daniel Fricke Thomas Lux
Abstract: We explore the network topology arising from a dataset of
the overnight interbank transactions on the e-MID trading platform from
January 1999 to December 2010. In order to shed light on the hierarchical
structure of the banking system, we estimate different versions of a
core-periphery model. Our main findings are: (1) A core-periphery structure
provides a better fit for these interbank data than alternative network
models, (2) the identified core is quite stable over time, consisting of
roughly 28% of all banks before the global financial crisis (GFC) and 23%
afterwards, (3) the majority of core banks can be classified as
intermediaries, i.e. as banks both borrowing and lending money, (4)
allowing for asymmetric `coreness’ with respect to lending and borrowing
considerably improves the fit, and reveals more concentration in borrowing
than lending activity of money center banks. During the financial crisis of
2008, the reduction of interbank lending was mainly due to core banks’
reducing their numbers of active outgoing links
Keywords: interbank market, network models, systemic risk, financial crisis; (follow links to similar papers)
JEL-Codes: G21,; G01,; E42; (follow links to similar papers)
60 pages, March 2012
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