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Interlinkages and structural changes in cross-border liabilities: a network approach

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  • Alessandro Spelta
  • Tanya Araujo

Abstract

We study the international interbank market through a geometrical and a topological analysis of empirical data. The geometrical analysis of the time series of cross-country liabilities shows that the systematic information of the interbank international market is contained in a space of small dimension, from which a topological characterization could be conveniently carried out. Weighted and complete networks of financial linkages across countries are developed, for which continuous clustering, degree centrality and closeness centrality are computed. The behavior of these topological coecients reveals an important modi cation acting in the financial linkages in the period 1997-2011. Here we show that, besides the generalized clustering increase, there is a persistent increment in the degree of connectivity and in the closeness centrality of some countries. These countries seem to correspond to critical locations where tax policies might provide opportunities to shift debts. Such critical locations highlight the role that speci c countries play in the network structure and helps to situates the turbulent period that has been characterizing the global nancial system since the Summer 2007 as the counterpart of a larger structural change going on for a more than one decade.

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Bibliographic Info

Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2012/19.

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Date of creation: Jul 2012
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Handle: RePEc:ise:isegwp:wp192012

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Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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Keywords: Cross-border exposures; interbank networks; financial linkages; debt shifting;

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References

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  1. Tanya Araújo & R. Vilela Mendes, 2001. "Function and form in networks of interacting agents," Working Papers Department of Economics 2001/03, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  2. Vilela Mendes, R. & Araújo, Tanya & Louçã, Francisco, 2003. "Reconstructing an economic space from a market metric," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 323(C), pages 635-650.
  3. Tanya Araujo & Francisco Louçã, 2007. "The Seismography of Crashes in Financial Markets," Working Papers Department of Economics 2007/05, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  4. Alessandro Spelta & Tanya Araújo, 2012. "The topology of cross-border exposures: beyond the minimal spanning tree approach," Working Papers Department of Economics 2012/11, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  5. R. Mantegna, 1999. "Hierarchical structure in financial markets," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 11(1), pages 193-197, September.
  6. Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007. "The topology of interbank payment flows," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 379(1), pages 317-333.
  7. Huizinga, H.P. & Nicodeme, G., 2004. "Are international deposits tax-driven?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-142606, Tilburg University.
  8. de Masi, G. & Iori, G. & Caldarelli, G., 2006. "A fitness model for the Italian interbank money market," Working Papers 06/08, Department of Economics, City University London.
  9. Fujiwara, Yoshi & Aoyama, Hideaki & Ikeda, Yuichi & Iyetomi, Hiroshi & Souma, Wataru, 2009. "Structure and Temporal Change of Credit Network between Banks and Large Firms in Japan," Economics Discussion Papers 2009-1, Kiel Institute for the World Economy.
  10. Iyetomi, Hiroshi & Ikeda, Yuichi & Aoyama, Hideaki & Fujiwara, Yoshi & Souma, Wataru, 2009. "Structure and Temporal Change of the Credit Network between Banks and Large Firms in Japan," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(7), pages 1-18.
  11. Yoshi Fujiwara & Hideaki Aoyama & Yuichi Ikeda & Hiroshi Iyetomi & Wataru Souma, 2009. "Structure and temporal change of the credit network between banks and large firms in Japan," Papers 0901.2377, arXiv.org, revised May 2009.
  12. Javier A. Reyes & Camelia Minoiu, 2011. "A Network Analysis of Global Banking:1978-2009," IMF Working Papers 11/74, International Monetary Fund.
  13. Garratt, Rodney & Mahadeva, Lavan & Svirydzenka, Katsiaryna, 2011. "Mapping systemic risk in the international banking network," Bank of England working papers 413, Bank of England.
  14. Tanya Araujo & Francisco Louçã, 2005. "The Geometry of Crashes - A Measure of the Dynamics of Stock Market Crises," Working Papers Department of Economics 2005/15, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  15. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
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Cited by:
  1. Tanya Araùjo & Alessandro Spelta, 2013. "Structural changes in cross-border liabilities: a multidimensional approach," DEM Working Papers Series 050, University of Pavia, Department of Economics and Management.

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