Too interconnected to fail: A survey of the interbank networks literature

Date: 2015
By: Hüser, Anne-Caroline
The banking system is highly interconnected and these connections can be conveniently represented as an interbank network. This survey presents a systematic overview of the recent advances in the theoretical literature on interbank networks. We assess our current understanding of the structure of interbank networks, of how network characteristics affect contagion in the banking system and of how banks form connections when faced with the possibility of contagion and systemic risk. In particular, we highlight how the theoretical literature on interbank networks offers a coherent way of studying interconnections, contagion processes and systemic risk, while emphasizing at the same time the challenges that must be addressed before general results on the link between the structure of the interbank network and financial stability can be established. The survey concludes with a discussion of the policy relevance of interbank network models with a special focus on macro-prudential policies and monetary policy.
Keywords: interbank networks,systemic risk,contagion,banking,macro-prudential policy
JEL: G21 E44 D85 G18 G01

Innovation through Networking: The Case of the Agricultural Sector

Date: 2014-10
By: Lambrecht, Evelien
Kühne, Bianka
Gellynck, Xavier
Innovation is widely recognized as being an important strategic tool for companies to increase their competitive advantage. Hereby, networks have become increasingly important as external sources for the necessary knowledge, ideas and financial resources. The main contribution of this paper is to shed light on how different network partners can explain or facilitate the different types of innovations in the agricultural sector. In contrast to other studies, we make a distinction between all four types of innovation: product, process, marketing and organizational innovation. Thus, this study has the objective to gain insight into the innovation process of farmers in terms of how they innovate, which network partners they consult in relation to innovation type, the obstacles they face, and where the network activities could be better aligned with the needs of the farmers, which could help to enable them to optimally support innovation and networking. The study is based on 36 in-depth interviews with farmers spread over five subsectors in Flanders (northern Belgium). Our most important findings are that the consulted partners and the observed barriers are different dependent on the innovation type. Hence, our study delivers a set of valuable insights and implications for farmers, network coordinators and policymakers. Farmers must be aware of the importance of partner suitability and network heterogeneity for the innovation type they are aiming at. Furthermore, farmers have to be aware of the fact that efficient networking is not the optimisation of single relationships independently of each other, but instead the management of synergies and coordination of all relationships in an efficient way. In addition, network coordinators should set up a clear strategy and communicate for which innovations their network can advise and help the farmer. These first conclusions should be further proven and supported by future research in order to draw general conclusions for the agricultural sector. As the sample of our study is limited to 36 respondents spread over five subsectors, it is necessary to conduct a quantitative study to achieve a representable sample and to include more subsectors. In addition, the study is limited to the Flemish region and literature in other countries about this subject is scarce. Hence, other researchers are encouraged to investigate if the results of Flanders can be supported by other regions in Europe and the world.
Keywords: Farmers, network, innovation, Flanders, qualitative research, Agribusiness,

Cognitive (Ir)reflection: New Experimental Evidence

Date: 2015-02
By: Carlos Cueva Herrero (Dpto. Análisis Económico Aplicado)
Iñigo Iturbe-Ormaetxe Kortajarene (Universidad de Alicante)
Esther Mata-Pérez (Dpto. Fundamentos del Análisis Económico)
Giovanni Ponti (Universidad de Alicante)
Marcello Sartarelli (Dpto. Fundamentos del Análisis Económico)
Haihan Yu (Dpto. Fundamentos del Análisis Económico)
Zhukova Vita (Dpto. Fundamentos del Análisis Económico)
We study whether cognitive ability explains choices in a wide variety of behavioral tasks, including risk and social preferences, by collecting evidence from almost 1,200 subjects across eight experimental projects. Since Frederick (2005)’s Cognitive Reflection Test (CRT) has been administered to all subjects, our dataset is one of the largest in the literature. We divide the subjects pool into three groups depending on their CRT performance. Reflective subjects are those answering at least two of the three CRT questions correctly. Impulsive ones are those who are unable to suppress the instinctive impulse to follow the intuitive although incorrect answer in at least two 2 questions, and the remaining subjects form a residual group. We find that females score significantly worse than males in the CRT, and intheir wrong answers impulsive ones are observed more frequently. The 2D-4D ratio, which is higher for females, is correlated negatively with subject’s CRT score. In addition, we find that differences between CRT groups in risk aversion depend on the elicitation method used. Finally, impulsive subjects have higher social preferences, while reflective subjects are more likely to satisfy basic consistency conditions in lottery choices.
Keywords: behavioral economics, cognitive reflection, gender, laboratory experiment, personality
JEL: C91 D81 J16