# Exponential random graph models for the Japanese bipartite network of banks and firms

## TL;DR

This paper applies exponential random graph models to analyze the structure and dynamics of the Japanese bipartite network of banks and firms, revealing interdependence and systemic fragility.

## Contribution

It demonstrates the use of exponential random graph models to uncover the network's dependence structure and fluctuation behavior in a real-world economic system.

## Key findings

- Links are not independent in the bank-firm network.
- The system exhibits large fluctuations indicating fragility.
- The network's structure is influenced by the two star model.

## Abstract

We use the exponential random graph models to understand the network structure and its generative process for the Japanese bipartite network of banks and firms. One of the well known and simple model of exponential random graph is the Bernoulli model which shows the links in the bank-firm network are not independent from each other. Another popular exponential random graph model, the two star model, indicates that the bank-firms are in a state where macroscopic variables of the system can show large fluctuations. Moreover, the presence of high fluctuations reflect a fragile nature of the bank-firm network.