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Measuring Global Financial Linkages: A Network Entropy Approach

Author

Listed:
  • Daeyup Lee

    (Economic Research Institute, Bank of Korea, Seoul 04531, Korea)

  • Hail Park

    (Department of International Business and Trade, Kyung Hee University, Seoul 02447, Korea)

Abstract

This paper measures the diversity of highly-connected financial networks using network entropy, and policy-related findings emerge from this research. With respect to the time variation of network entropy, international diversification of the global financial network constructed from foreign claims of international banks has decreased since the financial crisis of 2007–2008, while foreign claims among 20 reporting countries have concentrated more on core countries, such as the US and UK, since 2009. This change is more vividly captured by network entropy due to an unprecedented drop in the measurement. The results suggest that network entropy has promising potential in the financial market.

Suggested Citation

  • Daeyup Lee & Hail Park, 2019. "Measuring Global Financial Linkages: A Network Entropy Approach," Sustainability, MDPI, vol. 11(17), pages 1-10, August.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:17:p:4691-:d:261820
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    References listed on IDEAS

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    Cited by:

    1. Chao Xu & Jinchuan Ke & Xiaojun Zhao & Xiaofang Zhao, 2020. "Multiscale Quantile Correlation Coefficient: Measuring Tail Dependence of Financial Time Series," Sustainability, MDPI, vol. 12(12), pages 1-24, June.
    2. Mikhail Stolbov & Daniil Parfenov, 2023. "Credit risk linkages in the international banking network, 2000–2019," Risk Management, Palgrave Macmillan, vol. 25(3), pages 1-38, September.

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    Keywords

    network entropy; global financial networks;

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