Mapping systemic risk in the international banking network
Systemic risk among the network of international banking groups arises when financial stress threatens to criss-cross many national boundaries and expose imperfect international co-ordination. To assess this risk, we apply an information theoretic map equation due to Martin Rosvall and Carl Bergstrom to partition banking groups from 21 countries into modules. The resulting modular structure reflects the flow of financial stress through the network, combining nodes that are most closely related in terms of the transmission of stress. The modular structure of the international banking network has changed dramatically over the past three decades. In the late 1980s four important financial centres formed one large supercluster that was highly contagious in terms of transmission of stress within its ranks, but less contagious on a global scale. Since then the most influential modules have become significantly smaller and more broadly contagious. The analysis contributes to our understanding as to why defaults in US sub-prime mortgages had such large global implications.
|Date of creation:||02 Mar 2011|
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- Stefano Schiavo & Javier Reyes & Giorgio Fagiolo, 2010.
"International trade and financial integration: a weighted network analysis,"
Taylor & Francis Journals, vol. 10(4), pages 389-399.
- Giorgio Fagiolo & Javier Reyes & Stefano Schiavo, 2007. "International Trade and Financial Integration: a Weighted Network Analysis," Documents de Travail de l'OFCE 2007-11, Observatoire Francais des Conjonctures Economiques (OFCE).
- Giorgio Fagiolo & Javier Reyes & Stefano Schiavo, 2007. "International Trade and Financial Integration: A Weighted Network Analysis," LEM Papers Series 2007/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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