NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Using Network Method to Measure Financial Interconnection

Ying Xu, Jennifer Corbett

NBER Working Paper No. 26499
Issued in November 2019
NBER Program(s):International Finance and Macroeconomics

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.

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Document Object Identifier (DOI): 10.3386/w26499

 
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