Bank of Lithuania
June 16 14:30 - 15:30
Vilnius Totorių str. 4

Seminar “The formation of a core-periphery structure in heterogeneous financial networks" by Marco van der Leij, University of Amsterdam

Seminar language: English


Recent empirical evidence suggests that financial networks exhibit a core-periphery network structure. This paper aims at giving an explanation for the emergence of such a structure using network formation theory. We propose a simple model of the overnight interbank lending market, in which banks compete for intermediation benefits. Focusing on the role of bank heterogeneity, we find that a core-periphery network cannot be unilaterally stable when banks are homogeneous. A core-periphery network structure can form endogenously, however, if we allow for heterogeneity among banks in size. Moreover, size heterogeneity may arise endogenously if payoffs feed back into bank size.

Totorių str. 4, Vilnius
Last update: 30-08-2017