DebtStreamness: An Ecological Approach to Credit Flows in Inter-Firm Networks

TL;DR

This paper introduces DebtStreamness, a new ecological-inspired metric to analyze credit flow positions in inter-firm networks, revealing insights into systemic risk and hidden financial intermediation.

Contribution

It presents the novel DebtStreamness metric, applying ecological concepts to quantify firms' positions in credit chains and uncovering structural features not visible through traditional economic data.

Findings

Credit chains are generally short with tiered structures.

Loops in networks increase firms' DebtStreamness.

DebtStreamness captures unique financial structures beyond input-output data.

Abstract

Understanding how credit flows through inter-firm networks is critical for assessing financial stability and systemic risk. In this study, we introduce DebtStreamness, a novel metric inspired by trophic levels in ecological food webs, to quantify the position of firms within credit chains. By viewing credit as the ``primary energy source'' of the economy, we measure how far credit travels through inter-firm relationships before reaching its final borrowers. Applying this framework to Uruguay's inter-firm credit network, using survey data from the Central Bank, we find that credit chains are generally short, with a tiered structure in which some firms act as intermediaries, lending to others further along the chain. We also find that local network motifs such as loops can substantially increase a firm's DebtStreamness, even when its direct borrowing from banks remains the same. Comparing our results with standard economic classifications based on input-output linkages, we find that DebtStreamness captures distinct financial structures not visible through production data. We further validate our approach using two maximum-entropy network reconstruction methods, demonstrating the robustness of DebtStreamness in capturing systemic credit structures. These results suggest that DebtStreamness offers a complementary ecological perspective on systemic credit risk and highlights the role of hidden financial intermediation in firm networks.