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Input-output-based measures of systemic importance

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  • I�aki Aldasoro
  • Ignazio Angeloni

Abstract

The analyses of intersectoral linkages of Leontief [ The Structure of the American Economy: 1919-1929 , 1941] and Hirschman [ The Strategy of Economic Development , 1958] provide a natural way to study the transmission of risk among interconnected banks and to measure their systemic importance. In this paper, we show how elements from classic input-output analysis can be applied to banking and how to derive six indicators that capture different aspects of systemic importance, using a simple numerical example for illustration. We also discuss the relationship with other approaches, most notably network centrality measures, both formally and by means of a simulated network.

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  • I�aki Aldasoro & Ignazio Angeloni, 2015. "Input-output-based measures of systemic importance," Quantitative Finance, Taylor & Francis Journals, vol. 15(4), pages 589-606, April.
    • Handle: RePEc:taf:quantf:v:15:y:2015:i:4:p:589-606
    DOI: 10.1080/14697688.2014.968194
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    3. Angeloni, Ignazio & Faia, Ester & Winkler, Roland, 2014. "Exit strategies," European Economic Review, Elsevier, vol. 70(C), pages 231-257.
    4. Sam Langfield & Kimmo Soramäki, 2016. "Interbank Exposure Networks," Computational Economics, Springer;Society for Computational Economics, vol. 47(1), pages 3-17, January.
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    6. Halkos, George & Tsilika, Kyriaki, 2016. "Climate change impacts: Understanding the synergetic interactions using graph computing," MPRA Paper 75037, University Library of Munich, Germany.
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    11. Kang, Dongsuk & Lee, Duk Hee, 2017. "Energy shocks and detecting influential industries," Energy, Elsevier, vol. 125(C), pages 234-247.
    12. Edward Denbee & Christian Julliard & Ye Li & Kathy Yuan, 2014. "Network Risk and Key Players: A Structural Analysis of Interbank Liquidity," FMG Discussion Papers dp734, Financial Markets Group.
    13. Huang, Wei-Qiang & Wang, Dan, 2018. "A return spillover network perspective analysis of Chinese financial institutions’ systemic importance," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 405-421.
    14. Halkos, George E. & Tsilika, Kyriaki D., 2017. "Climate change effects and their interactions: An analysis aiming at policy implications," Economic Analysis and Policy, Elsevier, vol. 53(C), pages 140-146.
    15. Hüser, Anne-Caroline, 2016. "Too interconnected to fail: A survey of the Interbank Networks literature," SAFE Working Paper Series 91, Leibniz Institute for Financial Research SAFE.
    16. Huang, Wei-Qiang & Wang, Dan, 2018. "Systemic importance analysis of chinese financial institutions based on volatility spillover network," Chaos, Solitons & Fractals, Elsevier, vol. 114(C), pages 19-30.

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    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • G00 - Financial Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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