JAFEE20: INTERNATIONAL CONFERENCE ON SOCIO-ECONOMIC SYSTEMS WITH ICT AND NETWORKS
PROGRAM FOR SATURDAY, MARCH 26TH
Days:
next day
all days

View: session overviewtalk overview

09:30-09:40 Session 1: Opening Talk

Opening Talk

Chair:
Location: Room A
09:40-11:40 Session 2: Invited Talks (1)

Invited Talk (1)

Location: Room A
09:40
Complexity and Institutional Evolution

ABSTRACT. TBA

10:10
Comovement in Micro Prices and Macro Economy

ABSTRACT. TBA

10:40
Stochastic Macro-equilibrium: The Limitations of the Role of Prices in the Coordination of Economic Activities

ABSTRACT. Macroeconomics has had much difficulty in introducing heterogeneity of economic agents to theory. First, I discuss this problem taking real business cycle theory (RBC) and equilibrium theory of labor search as major examples. I then argue that the role of prices in the coordination of economic activities is overemphasized in standard economic theory. This observation leads us to the useful application of statistical physics tomacroeconomics. I propose the notion of stochastic macro-equilibrium. It provides a proper microfoundation for the Keynesian economics.

11:10
Community Capital and Commensurate Trust: The Prosperity and Limits of China’s Wenzhou Entrepreneurial Networks

ABSTRACT. This presentation examines how “commensurate trust” operates in relation to community capital (community-level social capital). Building on extant literature on social capital and networks, we specifically look at the community networks that evolved among the natives of China’s Wenzhou, often referred to as the birthplace of spontaneous capitalism in China. A key is to empirically grasp in depth how community members interact in local contingencies, to form a coherent pattern that may facilitate or inhibit further collective action. To what extent, moreover, is such pattern generation a product of community norms, values and strategies shared by them? How does such pattern generation differ from other communities whose collective performance is less impressive? This study directly addresses these issues with original empirical evidence. Drawing on extensive fieldwork, we investigate, at the community level, the emerging networking patterns of Chinese entrepreneurs from Wenzhou, whose striking economic success has been widely noted. In particular, we examine the extent to which Wenzhou entrepreneurs’ information search and sharing as well as mutual investments is related to their collective prosperity. We find the type and quality of commensurate trust enjoyed by its exclusionary community members a key to decode the secrets of their success as well as to curb their evolvability.

Keywords: Community capital, commensurate trust, social networks, Wenzhou, China

Bio: Dr. Toshihiro Nishiguchi is a Professor of Management at the Institute of Innovation Research, Hitotsubashi University and a Senior Research Fellow at the Policy Research Institute, Japan’s Ministry of Finance. He holds a B.A. in Political Science, Waseda University, an M.Sc. in Social and Economic Aspects of Science and Technology in Industry, Imperial College, the University of London, and a D.Phil. in Sociology, the University of Oxford. He has researched and taught at MIT, INSEAD, and the Wharton School of the University of Pennsylvania. He has published widely and is an internationally acknowledged authority on outsourcing and social networks. More details can be seen in: http://hitotsubashiiir-en.blogspot.jp/2012/12researcher-profile-nishiguchi-toshihiro.html

 

11:40-13:00Lunch
13:00-13:30 Session 3: Invited Talks (2)

Invited Talk (2)

Location: Room A
13:00
Econophysics - Synthesis of Social and Natural Sciences?

ABSTRACT. TBA

13:40-15:20 Session 4A: Agent-based Models in Economics and Finance (1)

Agent-based models in economics and finance (1)

Location: Room A
13:40
Dynamic Interaction Between Asset Prices and Bank Behavior: A Systemic Risk Perspective
SPEAKER: unknown

ABSTRACT. Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking system and credit risk from their lending in the interbank market. By and large, both risks increase during severe financial turmoil. Under this scenario, the paper shows the conditions under which both the individual and the systemic default tend to coincide.

14:05
Does high-frequency trading improve market quality?

ABSTRACT. We study a model of a limit-order market with high-frequency (HF) and non-HF traders. Our HF traders have a speed advantage over non-HF trader, which allows them to pick off existing limit orders in the order book or revise the quotes of their limit orders upon arrival of fundamental news. Our traders estimate non-execution and picking-off probabilities at different limit prices from the actual transaction and order placement history, and optimally select a limit price that maximizes their expected profit. We evaluate benefits and costs of HF trading by investigating its impacts on price discovery, volume, spread, volatility, and welfare. We demonstrate a larger spread and wider volatility, and a higher likelihood for social welfare loss in a market with HF traders than without HF traders. A transaction tax imposed on HF traders improves a chance for social welfare gain; however, a cancellation fee on HF traders is likely to widen income inequality. Thus, we suggest that the transaction tax is a possible policy choice for regulating HF trading in the market dominated by HF traders.

14:30
Agentifying a basic New Keynesian DSGE model
SPEAKER: unknown

ABSTRACT. Motivation Following the financial crisis of 2007 and the subsequent global recession of 2008, mainstream economic models were criticised for not being able to timely predict these major episodes of distress or, at least, to detect the growing instability of economic systems. In particular, dynamic stochastic general equilibrium (DSGE) models proved inadequate to disentangle the causes of the crises, forecast aggregate time series, and ultimately represent a reliable tool for policymakers. As a consequence, revived attention has been shifted on a new stream of macroeconomic computational models: agent-based (AB) models. These models incorporate bounded rationality, networks, heterogeneity in endowments and behavioural rules, as these elements are seen as essential determinants of properties of an actual economy. Naturally, complexity bears a cost as AB models fail to keep the analytical tractability of DSGE models and lack well-established econometric approaches to estimation. On the contrary, DSGE models represent a variegated yet unitary theoretical framework that allows economists to confront the implications of different economic hypotheses and parametric choices. Despite their empirical limitation, DSGE models still stand as the de facto paradigm of macroeconomic analysis. DSGE and AB literature streams have grown independently and it is very difficult to compare results and policy implications. The aim of this paper is to analyse and understand the differences between the two approaches to facilitate the communication with each other.

Approach To bridge DSGE and AB modelling, we consider the standard three-equation New Keynesian DSGE model for monetary policy analysis (see Gali, 2008). We drop the original rational expectation hypothesis and assume that agents are boundedly rational and form predictions using an adaptive learning mechanism. Specifically, the forecasting model of each agent is a vector autoregression whose parameters are estimated with recursive least squares. We assume that firms are hit by an aggregate technology shock and by an idiosyncratic technology shock. To establish a benchmark, we initially assume that all agents share the same information set and simulate the model with multiple homogeneous agents. Subsequently, we assume that each firm can only observe its individual technology process and is unable to observe aggregate productivity. This implies that the information sets differ across firms and the resulting beliefs are heterogeneous. As a consequence, finding the aggregate law of motion of the economy becomes analytically impossible. Therefore, we take a bottom-up approach by simulating and aggregating numerically the behavioural rules of every agent. In other terms, we agentify the DSGE model and turn it into an AB model. We aim at keeping the model as close as possible to the original DSGE model. However, agentification potentially allows to introduce features that would be difficult to incorporate in a DSGE model, such as market disequilibrium and bankruptcies.

Results (preliminary) The agentification of a well-known DSGE model allows us to assess how the empirical implications of the model are altered when heterogeneity and interactions play a role. We evaluate the unconditional moments of simulated data, the impulse response functions, and the stability properties of the model. Preliminary results indicate that volatility increases when agents are heterogeneous and the reaction of the model to a technology shock is much stronger. Conversely, the heterogeneity assumptions has weaker effects on the response to a monetary shock.

References Gali, J. (2008): “Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework,” Princeton University Press.

14:55
Investigation of the rule for investment diversification at the time of a market crash using an artificial market simulation
SPEAKER: unknown

ABSTRACT. As financial products have grown in complexity and level of risk compounding in recent years, investors have come to find it difficult to assess investment risk. Furthermore, companies managing investment funds are increasingly expected to perform risk control and thus prevent assumption of unforeseen risk by investors. A related revision to the investment fund legal system in Japan led to establishing what is known as ``the rule for investment diversification" in December 2014, without a clear discussion of its expected effects on market price formation having taken place. In this paper, we therefore used an artificial market to investigate its effects on price formation in financial markets where investors follow the rule at the time of a market crash that was caused by the collapse of the asset fundamental price. As results, we found that, in a two-asset market where investors followed the rule for investment diversification, when the fundamental price of one asset collapsed and its market price also collapsed, the other asset market price also fell.

13:40-15:20 Session 4B: Data-driven Approach in Economics and Finance

Data-driven approach in economics and finance

Location: Room B
13:40
Network approach to find the key industrial sectors in the World Economy
SPEAKER: Kien Tran

ABSTRACT. The usual way of identifying key sectors in an economy in Input-output analysis is using Leontief inverse Matrix to measure the backward linkages and the forward linkages of each sector. Alternatively, to evaluate the role of sectors by means of its centrality and degree assessment, we use an alpha-centrality modified method to the weighted network. It is used to identify both how a sector could be affected by other sectors and how it could infect the others in the whole economy. The data used is the world input-output table, part of the world input-output database (WIOD) funded by European Commission, in the period of 17 years from 1995 to 2011, but mainly focus on the data of year 2011. Having analyzed these results, the trend of these sectors in that range of time will be used to reveal how the world economy changed in the last decade.

14:05
An empirical analysis of the global input-output network and its evolution
SPEAKER: unknown

ABSTRACT. The importance of firms' production network in affecting the micro and macro economic behavior has been stressed by past catastrophic events. For example the flood in Thailand in 2011 exposed the vulnerability of the global supply chain to external events. Similarly, during the recent financial crisis, there has been much discussion about too big to fail firms. As reported by Carvalho (2014), the bail-out of General Motors was perceived as necessary to avoid disruptions in the supply chain of the American automotive industry. The idea that sectoral interdependencies, arising from the input-output structure, has an important influence on the aggregate economic behavior was put forward by Long Jr and Plosser (1983). Horvath (1998, 2000) and recently Acemoglu et al. (2012), show that the topology of the input-output network has a crucial role in determining the aggregate behavior of the system. Understanding the structure of the production network, and in particular determining which sectors act as hubs in the network, is important to understand the origin of aggregate fluctuations and to inform policymakers on how to prepare for, and recover from, adverse shocks hitting the production network. In complex network theory, these key sectors are identified by applying some appropriate measures of node centrality, such as the number of neighbors of a node (degree centrality), which is a local centrality measure, or global centrality measures based on the spectral properties of the graph (see Perra and Fortunato, 2008). In this paper, we link the empirical study of the global input-output network with the insights provided by an economic model. In order to determine the centrality of a node in the input-output network, we analyze the network through the lenses of an economic model that is calibrated on empirical data. We build a model related with the models described in Long Jr and Plosser (1983) and Acemoglu et al. (2012), and we calibrate the technological parameters. We claim that to understand the importance of an industry in the world input-output network it is necessary to employ a model to properly formalize links and nodes in economic terms. A node, in our context, is a representative firm whose maximizing behavior determines quantities and prices. A link is a trade relationship between two sectors explained by technological and behavioral factors. The model gives a theoretical structure to the input-output network, and in particular it gives a precise economic meaning to shocks and to their spreading. A shock to node i is defined as a productivity shock to industry i. The spreading of the shock is measured by the effect on production costs and prices to all other industries in the network. The empirical input-output network, on the other hand, gives us the path over which the shock propagates between sectors. Using the calibrated model it is possible to build a network of effects, where the nodes are the sectors and the links represent the direct and indirect effect of a shock on a node to production costs of all other nodes. The average out-strength of a node in the network of effects therefore represents the influence of that node on the global production costs. We will call this measure cost effect. The assumptions about the production and utility functions and about agents' behavior allow also to define a measure for the real GDP and to investigate the effects of a shock to each sector on the world real GDP. We call this measure GDP effect. We use these measures to analyze the global input-output network in 2011, and its evolution from 1995 to 2011.

14:30
Turkey’s Current Account Deficit Problem and Integration into the EU’s Economic and Monetary Union
SPEAKER: Emre Ünal

ABSTRACT. Most of the countries in the EU’s Economic and Monetary Union (EMU) have experienced over-valued currency and high costs of production, which increased their current account deficit between 2003 and 2011. Despite not being an EMU member, Turkey’s current account deficit increased in parallel with that of most EMU countries because the Turkish economy depends on them (they are its largest trading partners) and because the Customs Union agreement adopted in the mid-1990s weakened its competitive position and worsened its trade deficit with the EU countries due to unfavorable macroeconomic factors. Although Turkey experienced technological upgrades that changed low- and medium-tech industries into medium- and high-tech industries, increasing exports relative to the EU countries, it also experienced the highest ULC growth in export goods and had one of the most over-valued currencies. Its high costs of production and over-valued currency worsened Turkey’s current account deficit in the 2000s. Therefore, to increase its ability to compete with EU economies and reduce its current account deficit, Turkey must implement new institutional changes to reduce its wage rate growth to match the productivity growth of export goods. 

14:55
An Empirical Study on Measuring Systemic Risk Based on Information Flows using Variance Decompositions and DebtRank
SPEAKER: unknown

ABSTRACT. We analyze the systemic risk based on the information flows using the variance decompositions, DebtRank methods, and the Industry Sector Indexes during 2001 to 2015. 08. Using the KOSPI stock market as our setting, we find that (i) the systemic risk calculated by information flows of variance decompositions method shows strong positive relations with the market volatility, (ii) the magnitude of systemic risk measured from the information flows network by DebtRank method increases after the subprime financial crisis.

13:40-15:20 Session 4C: Sociophysics

Sociophysics

Location: Room C
13:40
Quantifying invariant features of within-group inequality in consumption across groups
SPEAKER: unknown

ABSTRACT. We study unit-level expenditure on consumption across multiple countries and multiple years, in order to extract invariant features of consumption distribution. We show that the bulk of it is lognormally distributed, followed by a power law tail at the limit. The distributions coincide with each other under normalization by mean expenditure and log scaling even though the data is sampled across multiple dimension including, e.g., time, social structure and locations. This phenomenon indicates that the dispersions in consumption expenditure across various social and economic groups are significantly similar subject to suitable scaling and normalization. Further, the results provide a measurement of the core distributional features. Other descriptive factors including those of sociological, demographic and political nature, add further layers of variation on the this core distribution. We present a stochastic multiplicative model to quantitatively characterize the invariance and the distributional features.

14:05
Force and Potential Encouraging Population Movements
SPEAKER: unknown

ABSTRACT. We have identified factors that do not depend on spatial division for population movements. We have analyzed population data from Japanese census. That population data is available to obtain with the high accuracy grid. Various data, such as land use and the number of office are also available in the same grid as the population data. The position of these data and population data can be adjusted easily. It is possible to determine the factors encouraging the population movement by investigating the relationship between the population increase or decrease and various assumed variables. Population movements are most active in the class which contains 18 years old in Japan. People move for various reasons such as school attendance or employment. Correlations between population movement and population density have been clearly observed in the statistical results. Relationship of population increase or decrease and the factors is able to be interpreted as force or potential to encourage the population movement. We have investigated the force and the potential using various methods for spatial division. There are several methods for spatial divisions to determine the unit base area for the variables. Prefecture borders and municipal borders are able to be used for the method of spatial division. Same sized squared lattice are also used for the spatial division. The potential measured by the ordinary population density are depend on the methods of spatial division. By using a population density that limits the area of land with the land-use data, it is possible to obtain a universal potential which does not depend on the spatial division.

14:30
Mathematical model for conflict of topics on social media
SPEAKER: Akira Ishii

ABSTRACT. The conflict or competition of topics are considered to occur often in social media like Facebook, Twitter or blogs. For example, on the topics of mobile phone, "iPhone" and "Android" are conflicted topic. On the topics of soft drinks, "Coca Cola" and "Pepsi Cola" are conflicted topic. In the real situation, it is possible that a campaingn of one goods are affected to the sales of other competitors. Such competition seems to be possible to analyze using social media if we have a certain theory to analyze them. In this study, we develop the mathematical model for conflicts of topics on social media as an extension of the mathematical model for hit phenomena of A.Ishii et.al.[1] as coupled equation for 2 topics. We build two equations for the attention of people for the topic A and topic B. In the coupled equations, the both attentions are affected by the attention of the competitor topic. After we fit the calculated results with observed posting counts on social media per each day, we can find the value of each parameter in the equation. The parameters mean the strength of effect of the campaign A or the campaign B for the topic A in social media. We can also consider the similar equation for the topic B. The present study is the extension of our former investigation [2]; the parameters can be both positive and negative. The social media used in this study are blog and twitter. Using our calculation, we can find that the effective campaign of the competitor is appeared as negative effect to a certain campaign on social media. This theory can be applied to decide the success of campaign of mobile phones, computers (Mac or Windows), mobile tablets, movie and political parties.

[1] A.Ishii, H.Arakaki, N.Matsuda, S.Umemura, T.Urushidani, N.Yamagata and N.Yoshida; The 'hit' phenomenon: a mathematical model of human dynamics interctions as s stochastic process, New Journal of Physics 14 (2012) 063018 (22pp) [2] A.Ishii, S.Sakaidani and S.Iwanaga, "Ananlysis of conflict of topics on social media by mathematical model and payoff matrix in game theory", submitted to the proceeding of Challenges in Data Science: a complex systgems perspective International Conference held at Torino, Italy, October 14-17, 2015

14:55
Study of analytical methods of language-specific burst phenomenon among social media

ABSTRACT. Society exhibits many human expression activities such as music and theater, art, photos and crafts, and literature that involve the participation of the performers and the audience. The performer usually uses various promotional activities, including direct promotion such as interview in newspapers, appearances on radio and television (TV) programs, and flyers and street announcements. Information dissemination via public networks and social network systems (SNS) (social media) that do not exhibit the immediacy and interactivity of the traditional promotional activities have become an important element of promotion and advertising. In the last decade, the performers are increasingly able to generate direct fan and general Internet interest by taking advantage of the SNS to disseminate information about performances and publications. It also has become increasingly possible to gauge fan interested from the activity on the Internet. Quantitative Internet activity information can be collected and analyzed to determine the effectiveness of advertisements and other promotion activities conducted by companies to transmit the information about the performers to the fan base and to the general public. The presence of the fan base that actively seeks information gives rise to the possibility that in the future a fan layer of the arts and culture could be assumed to take a leading role in the promotion and dissemination of the information about the performers.The performer together with the main promoters conduct an active exchange of information with the fans in order to increase the information about the performer on the Web, possibly hinting at future performer activity. Stage performances and concert box office and information disseminated through the traditional media, such as TV, were found to also tend to increase the information about the performers on the Web. Local theater companies have realized that effective promotion can be obtained by using the Web, even if for a particular performance genre the information about the performers on the Web must be adapted from the usual techniques of the performer. They therefore sought a method for obtaining knowledge that will be useful for future use of the information on the Web for promotion activities.

15:20-15:35Break
15:35-18:20 Session 5: Special Session for Commemoration of Dr. Jun-ichi Inoue

The Commemoration Session of Dr. Jun-ichi Inoue

Location: Room A
15:35
A stylised model for wealth distribution
SPEAKER: Enrico Scalas

ABSTRACT. A stylised random exchange model for the distribution of wealth is introduced. We first discuss a fully discrete version (a Markov chain with finite state space) in the spirit of finitary probabilistic models in econophysics [1]. We then study its discrete-time continuous-state-space version and we prove the existence of the equilibrium distribution using tools described by Meyn and Tweedie [2]. Finally, we discuss the connection of these models with Boltzmann-like kinetic equations for the marginal distribution of wealth [3]. This paper shows in practice how it is possible to start from a finitary description and connect it to continuous models following Boltzmann's original research program.

This is a joint paper with Bertram Duering and Nicos Georgiou.

References

[1] U. Garibaldi and E. Scalas, Finitary Probabilistic Methods in Econophysics, Cambridge University Press, Cambridge UK, 2010.

[2] S. Meyn and R.L. Tweedie, Markov Chains and Stochastic Stability, Cambridge University Press, Cambridge UK, 2009.

[3] B. Duering, D. Matthes and G. Toscani, Kinetic equations modelling wealth redistribution: a comparison of approaches, Phys. Rev E 78, 056103, 2008.

16:05
Inequality in Societies, Academic Institutions and Science  Journals: Gini and k-indices

ABSTRACT. Social inequality is traditionally measured by the Gini-index (g):  g=0 represents complete equality and g=1 represents complete inequality. Income or wealth data indicate the g value to be widely dispersed across the countries of the world: g values typically range from 0.30 to 0.65. We estimated similarly the Gini-index for the citations earned by the yearly publications of various academic institutions and the science journals. The ISI web of science  data suggests remarkably strong inequality and universality (g ~ 0.66) across all the universities and institutions  of the world, while for the journals we find g ~ 0.60 for  any typical year. We introduced a new inequality measure, namely the k-index, saying that the cumulative income or citations of (1 - k) fraction of people or papers exceed those earned by the fraction (k) of the people or publications respectively. We find, while the k-index value for income ranges from 0.60 to 0.75 for income distributions across the world, it has a value around 0.75 for different universities and institutions across the world and around 0.70 for the science journals. We will also discuss about the estimates of g & k values using some theoretical models of wealth distributions, including the Kinetic Exchange models.

 [Work done in collaboration with Late Prof. J.-I. Inoue]

16:35
Near-extreme events: Density, Copulas…

ABSTRACT. We would like to present study of the (near) extreme event statistics, which plays a very important role in the theory and practice of time series analysis. The reassembly of classical theoretical results in extreme value statistics is often undermined by non-stationarity and dependence between increments. Furthermore, the convergence to the limit distributions can be slow, requiring a huge amount of records to obtain significant statistics, and thus limiting its practical applications. Focussing, instead, on the closely related density of ‘‘near-extremes’’ – the distance between a record and the maximal value – can render the statistical methods to be more suitable in the practical applications and/or validations of models.

  We also review the ideas on temporal dependencies and recurrences in discrete time series. We revisit existing studies and redefine the relevant observables in the language of copulas (joint laws of the ranks). We propose that copulas provide an appropriate mathematical framework to study nonlinear time dependencies and related concepts— like recurrences and waiting times.

17:05
Firm Age Distributions and the Decay Rate of Firm Activities
SPEAKER: unknown

ABSTRACT. Using the ORBIS database that contains around 150 million pieces of firm-size data all over the world, we investigated firm activity data in 2008 and 2014 in the United States and Japan. We reconfirmed that the decay rate of firm activity does not depend on firm age in Japan. This is consistent with the observation that firm age distribution follows an exponential function in Japan. At the same time, in the United States, we found that the decay rate of young firms is high and it becomes lower and settle a constant value as firms’ age. From these observations, we proposed the model that follows the property observed in the decay rate of firm activity. The constant decay rate in Japan is included as a particular case in this model. The model analytically leads to firm age distribution, the young firm in which deviates from an exponential function. This analytical feature is observed in empirical data in the United States. We confirmed the consistency of this analysis comparing parameters estimated from the decay rate with those from firm age distribution. Furthermore, we found that, in most countries, the number of firms in which is sufficient in the ORBIS database, the decay rate of firm activity depends on firm age similarly to the United States. However, in other countries, the decay rate rapidly decreases compared to the United States. Exceptionally, in Korea, the decay rate gradually decreases compared to the United States, and comes down to zero as firms age.

17:30
Speculative Bubbles and Crashes in An Ising-like Model of Financial Makrets

ABSTRACT. The aims of this paper are (i) to propose an Ising-like model of financial markets to elucidate properties of statistical equilibria in a financial market, and (ii) to indicate a mechanism of bubbles and subsequent crashes. We consider a market in which the assets into two classes, the risky asset, and the risk-free asset are traded. Investors are divided into two groups. One is fundamentalists who maximize their expected utility of their wealth in the next period following their rational assessment of the fundamental values of risky assets. Another is noise-traders who maximize their utility of binary choice [1]: buying the risky asset and selling the risky asst. The noise trader’s behavior is modeled in a framework of the random utility theory of discrete choice with interaction [2], which can be considered as a model of Keynse's beauty contest metaphor. We demonstrate the mathematical equivalence of the random utility model and entropy maximization principle using conjugate theory. We also demonstrate that (i) if noise-traders’ psychological noise (corresponding to a temperature in entropy maximization principle) is large, then the market price converges to the fundamental price, so that the efficient market hypothesis holds, but that (ii) if noise-traders’ psychological noise is small, then their herd behavior gives cause to a bubble, and their positive-feedback trading prolongs bubble, but a bubble is necessarily ended up with a crash which is the first-order phase transition in the discrete choice model. Furthermore, we describe that cycles of repeated bubbles and crashes appear.

17:55
Effect of Crisis on Structure and Dynamics of Global Financial Network

ABSTRACT. We construct and analyze the structure and dynamics of global financial network by using the threshold and hierarchical clustering method. In threshold method we generate different networks at different values of correlation threshold. After the global financial crisis of 2008 we find that, the financial network is fully connected at threshold 0.1. At threshold 0.6, the American-European cluster remain connected together and two separate clusters of American-European and Asia-Pacific are formed. At threshold 0.8, we find that the European cluster of indices corresponding to France, Germany, United Kingdom, Switzerland and Austria is found to be tightly linked. We find that there is a change in the structure of organization of financial indices in the global financial network in different periods of crisis. In the hierarchical clustering analysis, after the crisis, we find that the structure of minimum spanning tree changes to more star like and the value of the cophenetic correlation coefficient decreases. Thus on comparing network results in different periods of crisis we find that the financial crisis of 2008 has led to an increase in the hierarchy in global financial indices.

18:30-20:30Banquet