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

Author

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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).

Suggested Citation

  • Kubelec, Chris & Sa, Filipa, 2010. "The geographical composition of national external balance sheets: 1980-2005," Bank of England working papers 384, Bank of England.
  • Handle: RePEc:boe:boeewp:0384
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    References listed on IDEAS

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    Cited by:

    1. Sebnem Kalemli-Ozcan & Elias Papaioannou & José-Luis Peydró, 2013. "Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity," Journal of Finance, American Finance Association, vol. 68(3), pages 1179-1228, June.
    2. Hale, Galina, 2012. "Bank relationships, business cycles, and financial crises," Journal of International Economics, Elsevier, vol. 88(2), pages 312-325.
    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. P. Giudici & A. Spelta, 2016. "Graphical Network Models for International Financial Flows," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 34(1), pages 128-138, January.
    5. Hobza, Alexandr & Zeugner, Stefan, 2014. "Current accounts and financial flows in the euro area," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 291-313.
    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.
    7. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Perri, Fabrizio, 2013. "Global banks and crisis transmission," Journal of International Economics, Elsevier, vol. 89(2), pages 495-510.
    8. Peltonen, Tuomas A. & Sarlin, Peter & Rancan, Michela, 2015. "Interconnectedness of the banking sector as a vulnerability to crises," Working Paper Series 1866, European Central Bank.
    9. Leonidas Sandoval Junior, 2014. "Dynamics in two networks based on stocks of the US stock market," Papers 1408.1728, arXiv.org, revised Aug 2014.

    More about this item

    Keywords

    International financial networks; international investment; financial liberalisation;

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F30 - International Economics - - International Finance - - - General

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