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The geographical composition of national external balance sheets: 1980-2005

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  • Kubelec, Chris

    ()
    (Bank of England)

  • Sa, Filipa

    ()
    (Trinity College, University of Cambridge)

Abstract

This paper constructs a data set on stocks of bilateral external assets and liabilities for a group of 18 countries, including developed and emerging economies. The data set covers the years 1980 to 2005 and distinguishes between four asset classes: foreign direct investment, portfolio equity, debt, and foreign exchange reserves. A number of stylised facts emerge from it. There has been a remarkable increase in interconnectivity over the past two decades. Financial links have become larger and more frequent and countries have become more open. The global financial network is centred around a small number of nodes, which have many and large links. In addition, the network exhibits ‘small-world’ properties, such as high clustering and low average path length. The combination of high interconnectivity, a small number of hubs, and ‘small-world’ properties makes for a robust-yet-fragile system, in which disturbances to the key hubs would be rapidly and widely transmitted. The global financial network is centred around the United States and the United Kingdom, which have large links and are connected to most other countries. This contrasts with the global trade network, which is arranged in three clusters: a European cluster (centred on Germany), an Asian cluster (centred on China), and an American cluster (centred on the United States).

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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 384.

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Length: 53 pages
Date of creation: 23 Mar 2010
Date of revision:
Handle: RePEc:boe:boeewp:0384

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Keywords: International financial networks; international investment; financial liberalisation;

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References

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Cited by:
  1. Hale, Galina, 2012. "Bank relationships, business cycles, and financial crises," Journal of International Economics, Elsevier, vol. 88(2), pages 312-325.
  2. Julian Caballero, 2012. "Banking Crises and Financial Integration," Research Department Publications 4816, Inter-American Development Bank, Research Department.
  3. Gourinchas, Pierre-Olivier & Rey, Hélène & Truempler, Kai, 2012. "The financial crisis and the geography of wealth transfers," Journal of International Economics, Elsevier, vol. 88(2), pages 266-283.
  4. Paolo Giudici & Alessandro Spelta, 2013. "Graphical network models for international financial flows," DEM Working Papers Series 052, University of Pavia, Department of Economics and Management.
  5. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Perri, Fabrizio, 2012. "Global Banks and Crisis Transmission," CEPR Discussion Papers 9044, C.E.P.R. Discussion Papers.
  6. Sentance, Andrew & Taylor, Mark P. & Wieladek, Tomasz, 2012. "How the UK economy weathered the financial storm," Journal of International Money and Finance, Elsevier, vol. 31(1), pages 102-123.

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