A Dynamic Network Model of Interbank Lending—Systemic Risk and Liquidity Provisioning

We develop a dynamic model of interbank borrowing and lending activities in which banks are organized into clusters, and adjust their monetary reserve levels to meet prescribed capital requirements. Each bank has its own initial monetary reserve level and faces idiosyncratic risks characterized by an independent Brownian motion, whereas system wide, the banks form a hierarchical structure of clusters. We model the interbank transactional dynamics through a set of interacting measure-valued processes. Each individual process describes the intracluster borrowing/lending activities, and the interactions among the processes capture the intercluster financial transactions. We establish the weak limit of the interacting measure-valued processes as the number of banks in the system grows large. We then use the weak limit to develop asymptotic approximations of two proposed macromeasures (the liquidity stress index and the concentration index), both capturing the dynamics of systemic risk. We use numerical examples to illustrate the applications of the asymptotics and conduct-related sensitivity analysis with respect to various indicators of financial activity.

International Monetary Fund

By the end of August 1952, the total exchange transactions of the International Monetary Fund were $892,408,380; repurchases in gold and United States dollars totaled $184,693,538. A repurchase payment of $27,121,500 was received from the Netherlands, subject to the receipt of further data on the Netherlands' monetary reserve. Brazil repurchased $25.5 million in August and $18.75 million in February, 1953, making its total repurchase since June 1952, $84.25 million.