Wang, Tianxi (2021) An Interbank Network Determined by the Real Economy. Working Paper. University of Essex, Department of Economics, Economics Discussion Papers. (Unpublished)
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Abstract
As a means of payment, bank liability circulates in a cycle. A fraction of one bank's liability naturally flows out to another, creating a network of interbank connections. We demonstrate how this network is determined by the production technologies, the resources distribution and the Input-Output network of the real economy. We find banks with a smaller outflow fraction see their funding costs less dependent on the interbank interest rate; the heterogeneity in banks' outflow fraction causes lending ine¢ ciency; and the identities of depositors and borrowers matter. These results will not arise if banks are modelled as intermediaries of loanable funds.
| Item Type: | Monograph (Working Paper) |
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| Uncontrolled Keywords: | circulation of bank liability, interbank network, outflow fraction, identities of depositors and borrowers |
| Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Economics, Department of |
| SWORD Depositor: | Elements |
| Depositing User: | Elements |
| Date Deposited: | 10 Mar 2021 16:20 |
| Last Modified: | 06 Jan 2022 14:22 |
| URI: | http://repository.essex.ac.uk/id/eprint/30021 |
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