A Network Analysis of Sectoral Accounts: Identifying Sectoral Interlinkages in G-4 Economies

Abstract

The recent financial crisis highlighted that balance sheet exposures can be a major shock transmission channel. Using sectoral accounts data in combination with data from the Coordinated Portfolio Investment Survey, International Investment Position, and BIS this paper estimates 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 represent a powerful tool for assessing financial stability, as they allow for the identification of 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.

Mapping bank securities across euro area sectors: comparing funding and exposure networks

“…This is mainly due to the fact that a network representation requires detailed sectoral counterparty data, which is scarce. To deal with this limitation, previous empirical studies have estimated sectoral linkages based on sectoral accounts and flow of funds data (Castrén and Kavonius, 2009;Castrén and Rancan, 2014;De Almeida, 2015). This paper is able to overcome these data limitations since we use the ESCB securities holdings statistics by sectors, which is a proprietary dataset that contains all the security-by-security cross-holdings of euro area sectors.…”