Crawford School of Public Policy
Australian National University (ANU)
132 Lennox Crossing
Institutional Affiliation: Australian National University
NBER Working Papers and Publications
|November 2019||Using Network Method to Measure Financial Interconnection|
with Jennifer Corbett: w26499
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.