Credit Network Research Articles

Financial market responses to a natural disaster: Evidence from credit networks and the Indian Ocean tsunami

We examine changes in financial allocations in Rotating Savings and Credit Associations (Roscas), a popular group-based financial institution world-wide, in the aftermath of the 2004 Indian Ocean tsunami. With financial data from locations along the South Indian coast we estimate the causal effect of this major natural disaster on financial flows between occupational groups, the price of credit and other loan characteristics. We find that the supply of funds in these credit networks remained remarkably stable, while demand by small and medium-scale entrepreneurs increased significantly. In response, substantial funds were channeled from wage-employed members and commercial investors to entrepreneurs. We conclude that natural disasters affect individuals with substantial heterogeneity and that the Roscas we study offer more scope for gains from trade in response to a seemingly aggregate shock than commonly assumed for traditional credit and insurance networks.

Credit practices and networks in the medieval Italian city: the memoriale of Dr Iacopo di Coluccino of Lucca

ABSTRACT A memoriale, or memorandum book, kept by the Lucchese doctor, Iacopo di Coluccino (1373–1416), offers insight into informal credit practices of wealthy citizens and credit networks among ordinary people in late fourteenth- and fifteenth-century Italy, in ways not evident from studies of moneylenders’ books, notarial registers or court records. Maestro Iacopo provided small amounts of credit as cash, goods or sales on credit without taking collateral or, in many cases, relying on notaries. This was possible because his credit network was confined to acquaintances and tenants, and because loans to the latter who faced difficulty had a co-operative nature. He sometimes brought legal proceedings against solvent clients to enforce debt collection. His credit network co-existed and overlapped with those of other wealthy citizens, local banks and pawnshops, and through his clients’ borrowing practices, he was deeply and extensively implicated in the urban and rural economy.

Multilayer Financial Complex Networks and Their Applications

In the context of global integration, the theory of financial complex networks has made significant contributions to the establishment of stable financial systems and effective regulatory systems. This survey paper presents a systematic methodology for the multi-layer financial complex networks and their applications. Several typical financial networks in existing research are first summarized: the interbank network, the credit network, the international trade network, and the dealer network. The main methods used in the existing literature to analyze the structure of financial networks include maximum entropy methods, network characterization, community detection, and dynamic multi-layer network. Financial risk contagion as well as spillover effects are the core issues that most of the literature focuses on. Finally, this paper reviews the shortcomings of the existing literature and suggests future research directions in this area.

Systemic Risk Analysis of Multi-Layer Financial Network System Based on Multiple Interconnections between Banks, Firms, and Assets.

Global financial systems are increasingly interconnected, and risks can spread more easily, potentially causing systemic risks. Research on systemic risk based on multi-layer financial networks is relatively scarce, and studies usually focus on only one type of risk. This paper develops a model of the multi-layer financial network system based on three types of links: firm-bank credit, asset-bank portfolio, and interbank lending, which simulates systemic risk under three risk sources: firm credit default, asset depreciation, and bank bankruptcy. The impact of the multi-layer financial network structure, default risk threshold, and bank asset allocation strategy is further explored. It has been shown that the larger the risk shock, the greater the systemic risk under different risk sources, and the risk propagation cycle tends to rise and then decline. As centralized nodes in the multi-layer financial network system, bank nodes may play both blocking and propagation roles under different risk sources. Furthermore, the multi-layer financial network system is most susceptible to bank bankruptcy risk, followed by firm credit default risk. Further research indicates that increasing the average degree of firms in the bank–firm credit network, the density of the bank-asset portfolio network, and the bank capital adequacy ratio all contribute to reducing systemic risk under the three risk sources. Additionally, the more assets a bank holds in a single market, the more vulnerable it is to the risks associated with that market.

Relations of Debt and Credit Networks in Post-Soviet Uzbekistan, Russia and Kazakhstan

Any relations and practices of debt within credit networks include not only pure economic exchange, such as barter or non-monetary exchange, but diverse kinds of social relations of debt. In this article, we consider case studies embedded in the particular context of early and late post-Soviet economic and political crisis, in which economic informalization was characterised by ‘wild capitalism’ or the absence of cash and livelihoods. We observe the coping strategies and mechanisms of economic survival adopted by ordinary people in response to these crises and to the absence of state social and economic institutions. We portray people’s concrete experiences of debt, solidary social relations, and economic exchange based on debt relationships in post-Soviet economies. The case studies are drawn from ethnographic material from Uzbekistan, Russia and Kazakhstan. Our case studies reveal that debt relations are not about two individuals who owe money but serve as the basis for debt-based trade, survival, and socializing networks, as well as part of moral economies. The article builds on scholarly works related to informal economies and survival mechanisms in post-Soviet space, to anthropology of debt, as well as discussion of (dis)trust.

Systemic risk in the consumer credit network across financial institutions

This study investigated a network of financial institutions in Korea using the Korea Consumer Credit Panel (KCCP). It is assumed that each consumer borrows from multiple institutions, so those institutions share risks from the same consumers regardless of the quality or type of loan. We constructed a financial network comprising those institutions and computed a contagion index based on their interconnections using a weight of probability of default for the individual borrowers. We found strong connection between banking institutions and credit card firms because of the convenience of making small loans using credit cards. However, with a weighted probability of default to the linkages among institutions, the connections between banking institutions and savings banks, non-credit card finance corporations and merchant banks are stronger than others, while banking institutions hold a central position and are exposed to the largest amount of loans individually. The contagion index hit a peak in 2013Q1 and then fell rapidly, before fluctuating at a relatively low level from 2016 to 2017Q2. The results enabled authorities to monitor systemic risk from the level of consumer credit, while accounting for specific types of consumers and their probability of default. This paper’s main contribution is its construction of a network of financial institutions from the level of consumer credit.

가부장의 크레딧 위기: 가정비극을 중심으로

This paper aims to read the domestic tragedies in terms of the credit crises of their patriarchal husbands, focusing on A Woman Killed with Kindness and A Yorkshire Tragedy. The patriarchs of domestic tragedies lose their moral or economic credit, and only with the sacrifice and patriarchal virtues of their wives or sisters, do the patriarchs recover their credit and are received again in the credit network. In the main plot of A Woman, John Frankford loses his reputation and his moral credit for his wife’s adultery. Anne recovers her husband’s moral credit by starving herself to death, constructing her reputation as a martyr, and even turning her deathbed into a performance. In the subplot, Sir Charles Mountford loses his economic credit by his reckless behavior. Not understanding the credit mechanism, Charles mistakes a debt of a usurer for a gift and persuades Susan to surrender her chastity as “a present” to Francis. Thanks to Susan’s endorsement of the patriarchal authority, Charles is reinstated into the credit network of the gentle class. In A Yorkshire Tragedy, a drama of archetypal characters, driven by the despair of his credit crisis, Husband stabs his little sons to death and almost kills his wife. Only Wife’s strong support of patriarchy reestablishes her husband as a patriarch and returns the household to the credit network both in the drama and in real life.

The life of the counterparty: Shock propagation in hedge fund-prime broker credit networks

Using novel credit data, we show that hedge fund borrowing is significantly overcollateralized, primarily with rehypothecable securities. An idiosyncratic liquidity shock to a major prime broker significantly decreases credit to connected hedge funds. The dominant channel behind this shock transmission is credit supply reduction rather than precautionary demand reduction. Funds posting more rehypothecable collateral are less affected because their collateral alleviates prime broker liquidity constraints. Exposed funds subsequently have lower aggregate credit with worse terms, suggesting imperfect substitutability across hedge fund credit sources. Funds subject to the decrease in balance sheet leverage subsequently increase portfolio illiquidity, embedded leverage, and derivatives exposure.

Measuring systemic risk for bank credit networks: A multilayer approach

Systemic risk analysis has become a very important undertaking in most central banks after the Global Financial Crisis (GFC). This paper describes the Colombian credit system of banks and firms as a bipartite network of lenders and borrowers. To such network, we apply a spectral method to identify the most central actors, and a variant of the DebtRank algorithm to identify the banks and firms that would be the most vulnerable to shocks in the system, and the most impactful in propagating them. We perform our analysis with a multi-layer approach, analysing networks of loans in the Commercial, Housing, and Microcredit domain. Our analyses reveal a rich and heterogeneous systemic risk profile across the Colombian credit system, and highlight the presence of considerable network effects that would contribute to shape the propagation of shocks from the real economy to the banking system.

E-Commerce Credit Network Control Strategy from a Critical Perspective

Credit problems are the main bottleneck in the development of e-commerce. Both the time and degree of e-commerce credit control directly affect its economic benefits. From the perspective of the criticality of complex systems, this paper explores the control node of e-commerce credit behaviour. Implementing control in this node can not only ensure the stable development of the credit network but also optimise the control cost. This paper constructs a credit behaviour model for the four regulatory behaviours of the transaction subject, analyses the evolution law of the credit network, and determines the critical state of the network. Finally, the paper’s empirical analysis and simulation experiments prove that when the false information in the credit network in the empirical data is 32%, the implementation of credit control has an efficient control effect. Nevertheless, 32% is not a universal result; the specific critical point value needs to be recalculated according to the theoretical derivation of the critical point combined with the actual network. These research results can help regulators obtain the highest regulatory return with the lowest regulatory investment.

The American Life of Jourdan Saunders, Slave Trader

The American Life of Jourdan Saunders, Slave Trader Joshua D. Rothman (bio) On February 13, 1830, Jourdan M. Saunders sent a letter from New Orleans to David Burford in Smith County, Tennessee, about fifty miles east of Nashville. Burford was Saunders's brother-in-law and his business partner, the two having pooled $4,000 between them a few years earlier to create J. M. Saunders and Company, an enterprise that operated "in the negro speculation business." Returns from the company's first two seasons in the slave trade had been mixed, and Burford had been wavering about putting more money into the partnership. Saunders was writing with information that he thought would help Burford make up his mind.1 Saunders had gone to New Orleans to sell slaves, and while he was there he made the acquaintance of Isaac Franklin, a fellow Tennessean and a partner in the slave-trading colossus known as Franklin and Armfield. Franklin had taken a liking to Saunders. He had allowed Saunders to live with him "on the cheapest terms" at Franklin's rented offices and sales compound at the intersection of Esplanade Avenue and Francais Street in the Faubourg Marigny, just outside what is today the French Quarter. And now, Saunders told Burford, Franklin had asked Saunders if he wanted to become a purchasing agent for Franklin and Armfield, combining his money with that of Franklin's company to buy enslaved people in Virginia who would be shipped to Franklin in New Orleans for sale. All profits and losses would be split evenly between the two businesses.2 [End Page 227] Saunders made the pretense of seeking Burford's counsel, writing that his "confidence and prepossession" for Franklin made him perhaps a little too eager to accept the proposition. In truth, Saunders was neither especially concerned that Franklin had overawed him nor genuinely asking Burford for advice. It was an offer he was not going to refuse. Franklin's "experience and acquaintance in this market gives him a decided advantage in the making of sales over allmost any other person engaged in the business," Saunders wrote, "and upon the whole I have little or no doubt of it being an excellent arrangement for me." All Saunders really wanted to know was whether Burford was in or out. If Burford was disposed to keep his money in the trade, Saunders would relay the message to Franklin. But "if not," Saunders continued, "I feel no hesitation in deciding for myself."3 The recent profusion of scholarship on the relationship between slavery and capitalism in the United States has significantly expanded our understanding of the domestic slave trade and its centrality to the development of the South and the nation alike. Edward E. Baptist and Calvin Schermerhorn, for example, have illustrated how the trade's integration with banks, credit networks, and cotton production helped fuel national economic growth. Robert H. Gudmestad, Steven Deyle, and Maurie D. McInnis have shown how the trade shaped the commercial and moral values of white southerners, how their efforts to justify their participation in the trade could not entirely resolve political and cultural tensions within the region, and how the ubiquity and visibility of markets in human beings exacerbated sectional conflict. Walter Johnson, Daina Ramey Berry, and Damian Alan Pargas, meanwhile, have taken us inside those markets to demonstrate the impact of the trade on the enslaved themselves, who were aware they could be sold at any moment, who fought to shape the circumstances of forced migration and sale when it became unavoidable, and who always knew their value was not reducible to a price tag.4 [End Page 228] Yet we are only just beginning to learn about the men who actually conducted the domestic trade. Thousands of slave traders collectively took more than a half million enslaved people on forced migrations from the upper South to the lower South during the first sixty years of the nineteenth century, and they moved hundreds of thousands more within the boundaries of individual states. We know relatively little, however, about who these traders were or where they came from, and we have few detailed accounts of how they...

Private Lending in an Alpine Region during the Eighteenth Century: A Family of Merchant-Bankers and Their Credit Network

The literature on early modern credit markets emphasizes both the social embeddedness of credit relationships and the role of notaries. To enhance our understanding of how credit markets functioned in a “less-developed” economy, we investigate the local lending activities of a merchant-banker family that operated at the intersection of formal and informal credit. A combination of economic rationality and social motivations in lending decisions emerges. The credit network of this family firm provides a portrait of the social structure of the local community, where the central position of a few trusted notaries and members of the business and political elite highlights the prevalence of relationships of power and favor over impersonal market exchange. The predominance of informal credit reveals a preference for loans made outside of notarial circuits. Nonetheless, notaries were crucial in lending to borrowers of lower social status and with weak ties, thus helping the liquidity of these merchants to “trickle down” into local society.

Construction and Optimization of Transboundary Business Financial Credit Network in the Era of 5G Communication

The e-commerce industry has broken through the original geographical restrictions, successfully integrated with world trade, and evolved new e-commerce model. The e-commerce model, that is, e-commerce transactions across international trade, has been rapidly expanded. However, e-commerce transactions across international trade have innate virtuality and information imbalance. These problems have caused many credibility problems and, at the same time, restrict and hinder the healthy and sustainable evolution of transactions across international trade. Credit evaluation of transaction entities through credit evaluation models is an effective way to restrict the behavior of transaction entities. However, the existing credit evaluation models lack pertinence and effectiveness when applied in the context of cross-border e-commerce. In the era of 5G communication, building a complete credit evaluation system through 5G-related technologies will certainly become a new way for the stable evolution of transactions across international trade. This not only can effectively control the risks of cross-border trade and improve efficiency but also properly resolve the uncertainty caused by information imbalance. In order to better promote the development of e-commerce, this article establishes an e-business evaluation module based on integrated fusion performance rating. The weight and the membership of each factor are determined by AHP. Finally, the model was verified by an example. The results show that the evaluation system and the method proposed in this paper are feasible and effective for solving practical problems and provide a solid foundation for the construction of the network of my country’s e-commerce credit rating system. Establishing a scientific and reasonable e-commerce integrity evaluation system has very good practical significance.

The Effect of Network Topology on Credit Network Throughput

The global economy relies on digital transactions between entities who do not trust one another. Today, such transactions are handled by intermediaries who extract fees (e.g., credit card providers). A natural question is how to build financial systems that limit the need for such middlemen.

COUNTERCYCLICAL CAPITAL BUFFERS, BANK CONCENTRATION AND MACROFINANCIAL STABILITY IN AN AGENT-BASED MACRO-FINANCIAL FRAMEWORK

This paper examines the impact of countercyclical capital buffers (CCyBs) on financial stability and contributes to the discussion of CCyBs in an agent-based framework. The main focus of this work lies upon the question whether the implementation of CCyBs according to the Basel III framework improves financial stability unconditionally, or at the expense of unintended side effects. For this purpose, we extend the agent-based model of [Riccetti, L., Russo, A. and Gallegati, M., Firm–bank credit network, business cycle and macroprudential policy, J. Econ. Interact. Coord. (2021)] to investigate the effect of credit-to-GDP gap-based CCyBs in general as well as the effects of varying the smoothing parameter lambda [Formula: see text] of the Hodrick–Prescott (HP) filter within the method of calculating CCyBs. To the best of our knowledge, this study is the first one that investigates systematically how the method of calculating credit-to-GDP gap-based CCyBs may affect macrofinancial dynamics and stability in such an agent-based framework.

Charity, debt and social control in England’s early modern prisons

ABSTRACT From the mid-sixteenth century, the prison was increasingly fundamental to social relations and economic life in early modern England. An explosion of civil litigation was accompanied by unprecedented levels of imprisonment for debt, leaving many prisoners reliant upon a growing economy of prison charity. This article addresses the nature of such charity, its role in prison society and what it suggests about early modern attitudes towards imprisonment. It uncovers the range and scale of prison relief, from official aid to everyday begging and face-to-face alms. Charity was vital to prison life, and thus to securing growing credit networks. Yet by extension it was also a vector of moral judgement that left prisoners dependent, subordinated and subject to discipline. This article uncovers assumptions about the function of imprisonment for debt implicit in both practices of and commentaries on prison charity. The moral logic of early modern debt gave new disciplinary meaning to the prison, emphasized by the potential for social judgement inherent in charity. Theories of prisons’ punitive and reformative potential emerged to police social relations based on credit, trust and reputation. Thus, the ethical context of credit relations gave prisons new significance as institutions of moral judgement, punishment and rehabilitation.

Agent‐Based Modeling of a Multiagent Multilayer Endogenous Financial Network and Numerical Simulations

Based on a realistic correlated behavior mechanism and a connected balance sheet relationship among firms, banks, households, and the government, we construct a multiagent multilayer endogenous financial network that includes an interbank network, an investment network, a deposit network, a business credit network, and a loan network. During the construction process, behaviors are endogenized such that an endogenous financial network is constructed. The simulation results show that the interbank network, the investment network, and the business credit network all obey the power‐law distribution; the deposit network and the loan network exhibit a tendency for large banks to have larger degree distributions and small banks to have smaller degree distributions.

Esther und ihre Töchter. Geschlechterrollen und Wirtschaftstätigkeit jüdischer Frauen in der Vormoderne

Abstract This essay examines the commercial activities of Jewish women in the Franconian town of Kronach, a district seat in the northern part of the Prince-Bishopric of Bamberg, in the early modern period. It focuses on the widow Esther (c. 1645–1727), a contemporary of the famous merchant woman Glikl bas Judah Leib in Altona. Esther’s business activities, which are documented for a period of more than four decades, included the sale of household goods and textiles as well as the marketing of agrarian products. In addition, she was involved in credit transactions and pawnbroking. Numerous contacts with town dwellers and country people demonstrate her involvement in Christian economic and credit networks. As the biographies of Esther’s daughters Ella and Jüdla show, married women also played central roles within households and working communities. They not only supported their husbands, but continued to run their businesses in their absence and engaged in trade on their own accounts.

The effect of network topology on credit network throughput

Credit networks rely on decentralized, pairwise trust relationships (channels) to exchange money or goods. Credit networks arise naturally in many financial systems, including the recent construct of payment channel networks in blockchain systems. An important performance metric for these networks is their transaction throughput. However, predicting the throughput of a credit network is nontrivial. Unlike traditional communication channels, credit channels can become imbalanced; they are unable to support more transactions in a given direction once the credit limit has been reached. This potential for imbalance creates a complex dependency between a network’s throughput and its topology, path choices, and the credit balances (state) on every channel. Even worse, certain combinations of these factors can lead the credit network to deadlocked states where no transactions can make progress. In this paper, we study the relationship between the throughput of a credit network and its topology and credit state. We show that the presence of deadlocks completely characterizes a network’s throughput sensitivity to different credit states. Although we show that identifying deadlocks in an arbitrary topology is NP-hard, we propose a peeling algorithm inspired by decoding algorithms for erasure codes that upper bounds the severity of the deadlock. We use the peeling algorithm as a tool to compare the performance of different topologies as well as to aid in the synthesis of topologies robust to deadlocks.

Commercial and banking credit network in Uruguay

We build a commercial credit network, identify the most central economic sectors in terms of commercial debt, and provide a more complete idea of total indebtedness and financial interlinks between firms and banks in Uruguay. “Commerce,” “manufacturing,” and “transportation, storage, and communication” are the most central sectors in the commercial credit network. In a stress testing exercise, “transportation, storage, and communication” and “hotels and restaurants” are deeply affected in all cases. These sectors are the most exposed in terms of contagion. “Commerce” and “manufacturing” are central and have the highest level of indebtedness, but they have a large amount of liquid assets, which allows them to overcome shocks from other sectors. The results highlight the importance of having a good estimation of commercial credit interlinks for financial stability analysis.