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Mapping change in the overnight money market

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  • Bech, Morten L.
  • Bergstrom, Carl T.
  • Rosvall, Martin
  • Garratt, Rodney J.

Abstract

We use an information-theoretic approach to describe changes in lending relationships between financial institutions around the time of the Lehman Brothers failure. Unlike previous work that conducts maximum likelihood estimation on undirected networks our analysis distinguishes between borrowers and lenders and looks for broader lending relationships (multi-bank lending cycles) that extend beyond the immediate counter-parties. We detect significant changes in lending patterns following implementation of the Interest on Required and Excess Reserves policy by the Federal Reserve in October 2008. Analysis of micro-scale rates of change in the data suggests these changes were triggered by the collapse of Lehman Brothers a few weeks before.

Suggested Citation

  • Bech, Morten L. & Bergstrom, Carl T. & Rosvall, Martin & Garratt, Rodney J., 2015. "Mapping change in the overnight money market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 424(C), pages 44-51.
    • Handle: RePEc:eee:phsmap:v:424:y:2015:i:c:p:44-51
    DOI: 10.1016/j.physa.2014.11.034
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    References listed on IDEAS

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    Cited by:

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    5. Radoslav Raykov, 2024. "Decomposing Large Banks’ Systemic Trading Losses," Staff Working Papers 24-6, Bank of Canada.
    6. Chae, Bongsug (Kevin), 2019. "A General framework for studying the evolution of the digital innovation ecosystem: The case of big data," International Journal of Information Management, Elsevier, vol. 45(C), pages 83-94.

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