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Using Network Method to Measure Financial Interconnection

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  • Ying Xu
  • Jennifer Corbett

Abstract

This paper uses a new approach to measuring financial openness, highlighting interconnectedness in a network of financial flows. Applying an adapted version of eigenvector centrality, often used in network analysis, the new measure captures multidimensional and high-degree financial relations among countries. It provides a nuanced picture of financial integration and interconnectedness in the global and regional financial networks. The United Kingdom and the United States remain the ‘core’ in the global banking network, with all other countries scattered in the ‘periphery’. The application of the new measure of financial integration to the empirical analysis reveals the nonlinear relationship between financial integration and output volatility.

Suggested Citation

  • Ying Xu & Jennifer Corbett, 2019. "Using Network Method to Measure Financial Interconnection," NBER Working Papers 26499, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26499
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises

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