Publications

Authors:

Buccheri, Giuseppe; Mazzarisi, Piero

Title:

Realized Random Graphs, with an Application to the Interbank Network

Year:

2024

Type of item:

Articolo in Rivista

Tipologia ANVUR:

Articolo su rivista

Language:

Inglese

Referee:

No

Name of journal:

JOURNAL OF FINANCIAL ECONOMETRICS

ISSN of journal:

1479-8409

Page numbers:

1-33

Keyword:

State-space models, Dynamic networks, Interbank market, Systemic risk

Short description of contents:

We introduce a new inferential methodology for dynamic network models driven by latent state variables. The main idea is to obtain a noisy representation of the state variables dynamics by computing a sequence of cross-sectional estimates of the network model at each point in time. The dynamic modeling of these cross-sectional estimates, that we name realized random graphs, transforms the original nonlinear state-space network model into a linear time-series model that can be easily estimated. Under the assumption of a mixed-membership blockmodel structure, the model parameters and the unobservable state variables can be consistently estimated when both the size of the network and the time-series length are large. By allowing for an extremely rich parameterization of the model in high dimensions, the proposed methodology describes the heterogeneous topology of real-world networks. We corroborate our findings by using this novel framework to estimate and forecast the dynamic common factors driving the evolution of the Italian electronic market of interbank deposits, and we show that the interbank lending rate is a key factor determining the network topology.

Product ID:

141601

Handle IRIS:

11562/1141506

Last Modified:

December 1, 2024

Bibliographic citation:

Buccheri, Giuseppe; Mazzarisi, Piero, Realized Random Graphs, with an Application to the Interbank Network «JOURNAL OF FINANCIAL ECONOMETRICS» , 2024 , pp. 1-33

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