A Network Analysis of Sectoral Accounts: Identifying Sectoral Interlinkages in G-4 Economies
IMF Working Papers, May 19, 2015
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Bibliographic details
- Authors: Luiza Antoun de Almeida
- Published: May 19, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513523101.001
Summary
- The recent financial crisis highlighted that balance sheet exposures can be a major shock transmission channel.
- This paper uses sectoral accounts data in combination with data from the Coordinated Portfolio Investment Survey, International Investment Position, and BIS to estimate bilateral exposures between financial and non-financial sectors in three different financial instruments within and across G-4 economies (Euro Area, Japan, U.K. and U.S.).
- The generated financial networks are presented as a tool for assessing financial stability and for identifying systemically important sectors.
- The analysis suggests that after the financial crisis bilateral exposures in debt securities have increased, while exposures in loans and equities have declined.
- Shock simulations reveal that the vulnerability of the financial sector to the government sector has increased considerably since the outbreak of the financial crisis.
Data and Methodology
- Data sources: sectoral accounts, Coordinated Portfolio Investment Survey, International Investment Position, BIS.
- Geographic scope: G-4 economies (Euro Area, Japan, U.K., U.S.).
- Instruments analyzed: loans, equities, debt securities.
- Approach: estimation of bilateral exposures between financial and non-financial sectors and construction of financial networks to identify systemic importance and shock transmission channels.
Key Findings and Statistics
- After the financial crisis:
- Bilateral exposures in debt securities have increased.
- Exposures in loans have declined.
- Exposures in equities have declined.
- Shock-simulation result:
- Vulnerability of the financial sector to the government sector has increased considerably since the outbreak of the financial crisis.
Policy Implications and Applications
- Financial networks derived from sectoral and cross-border position data can be used to:
- Assess financial stability risks arising from balance sheet linkages.
- Identify systemically important sectors for targeted monitoring and macroprudential policy.
- Increased financial-sector vulnerability to government suggests usefulness of:
- Monitoring sovereign-bank and sovereign-nonfinancial sector linkages.
- Designing policies that account for growing government-related exposures in financial balance sheets.