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Identifying Inter-Sectoral Exposures in Ireland using Network Analysis

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  • Cussen, Mary

    (Central Bank of Ireland)

Abstract

To identify potential sources of contagion, this Letter examines the financial connections between the economic sectors of the Irish economy using network analysis tools. This has not been done before for the Irish economy and the analysis benefits from the availability of unpublished whom-to-whom data. The findings reveal that, at a high level of aggregation, the broad sectors of the Irish economy are very connected. Non-resident entities have had very significant network links with the domestic economy. This largely reflects the activities of multinational corporations. Domestic investment funds and money market funds have very strong links with non-resident entities but their connections with the Irish economy are quite limited. Irish households have a high net exposure to nonresident entities through their holdings in insurance and pension fund products. This underlines the importance of continued surveillance of this channel. Finally, domestic credit institutions are highly connected to all parts of the economy but, towards the end of the sample studied, these links have been in secular decline due to the deleveraging process.

Suggested Citation

  • Cussen, Mary, 2017. "Identifying Inter-Sectoral Exposures in Ireland using Network Analysis," Economic Letters 03/EL/17, Central Bank of Ireland.
  • Handle: RePEc:cbi:ecolet:03/el/17
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    File URL: https://centralbank.ie/docs/default-source/publications/economic-letters/economic-letter-vol-2017-no-3.pdf?sfvrsn=8
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    References listed on IDEAS

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    3. Nuno Silva, 2010. "Inter-Sector Relations in the Portuguese Economy: an Application of Contingent," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    4. Upper, Christian, 2011. "Simulation methods to assess the danger of contagion in interbank markets," Journal of Financial Stability, Elsevier, vol. 7(3), pages 111-125, August.
    5. Castrén, Olli & Kavonius, Ilja Kristian, 2009. "Balance Sheet Interlinkages and Macro-Financial Risk Analysis in the Euro Area," Working Paper Series 1124, European Central Bank.
    6. Castrén, Olli & Rancan, Michela, 2013. "Macro-networks: an application to the euro area financial accounts," Working Paper Series 1510, European Central Bank.
    7. Anthony J. Pellechio & Johan Mathisen, 2006. "Using the Balance Sheet Approach in Surveillance; Framework, Data Sources, and Data Availability," IMF Working Papers 06/100, International Monetary Fund.
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