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Structural changes in cross-border liabilities: a multidimensional approach

  • Tanya Araùjo

    ()

    (ISEG – Technical University of Lisbon & UECE Lisbon)

  • Alessandro Spelta

    ()

    (Department of Economics and Management, University of Pavia)

We study the international interbank market through a geometric analysis of empirical data. The geometric 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. Geometric spaces of financial relations across countries are developed, for which the space volume, multivariate skewness and multivariate kurtosis are computed. The behavior of these coefficients reveals an important modification acting in the financial linkages since 1997 and allows to relate the shape of the geometric space that emerges in the last years to the globally turbulent period that has characterized financial systems since the latest Nineties. Here we show that, besides a persistent decrease in the volume of the geometric space since 1997, the observation of a generalized increase in the values of the multivariate skewness and kurtosis sheds some light on the behavior of cross-border interdependencies during periods of financial crises. This was found to occur in such a systematic fashion, that these coefficients may be used as a proxy for systemic risk.

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File URL: http://economia.unipv.it/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0050.pdf
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Paper provided by University of Pavia, Department of Economics and Management in its series DEM Working Papers Series with number 050.

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Length: 21 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:pav:demwpp:demwp0050
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  1. Monica Billio & Mila Getmansky & Andrew W. Lo & Loriana Pelizzon, 2011. "Econometric Measures of Connectedness and Systemic Risk in the Finance and Insurance Sectors," Working Papers 2011_21, Department of Economics, University of Venice "Ca' Foscari".
  2. Araújo, Tanya & Dias, João & Eleutério, Samuel & Louçã, Francisco, 2013. "A measure of multivariate kurtosis for the identification of the dynamics of a N-dimensional market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(17), pages 3708-3714.
  3. 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.
  4. 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.
  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. 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, pages 1-18.
  7. Spelta, Alessandro & Araújo, Tanya, 2012. "The topology of cross-border exposures: Beyond the minimal spanning tree approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(22), pages 5572-5583.
  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. 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.
  10. Patrick McGuire & Nikola Tarashev, 2006. "Tracking international bank flows," BIS Quarterly Review, Bank for International Settlements, December.
  11. R. Vilela Mendes & Tanya Ara\'{u}jo & Francisco Lou\c{c}\~{a}, 2002. "Reconstructing an economic space from a market metric," Papers cond-mat/0211108, arXiv.org.
  12. Tanya Araujo & Francisco Louca, 2007. "The geometry of crashes. A measure of the dynamics of stock market crises," Quantitative Finance, Taylor & Francis Journals, vol. 7(1), pages 63-74.
  13. Zhao, Yi & Konishi, Sadanori, 1997. "Limit distributions of multivariate kurtosis and moments under Watson rotational symmetric distributions," Statistics & Probability Letters, Elsevier, vol. 32(3), pages 291-299, March.
  14. 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.
  15. Lehar, Alfred, 2005. "Measuring systemic risk: A risk management approach," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2577-2603, October.
  16. Alessandro Spelta & Tanya Araújo, 2012. "Interlinkages and structural changes in cross-border liabilities: a network approach," Quaderni di Dipartimento 181, University of Pavia, Department of Economics and Quantitative Methods.
  17. Garratt, Rodney & Mahadeva, Lavan & Svirydzenka, Katsiaryna, 2011. "Mapping systemic risk in the international banking network," Bank of England working papers 413, Bank of England.
  18. Javier A. Reyes & Camelia Minoiu, 2011. "A Network Analysis of Global Banking:1978-2009," IMF Working Papers 11/74, International Monetary Fund.
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