The Geographical Composition of National External Balance Sheets: 1980-2005

53 Pages Posted: 24 Mar 2010

See all articles by Chris Kubelec

Chris Kubelec

Bank of England

Filipa Sa

King's College London; IZA Institute of Labor Economics

Date Written: March 23, 2010

Abstract

This paper constructs a data set on stocks of bilateral external assets and liabilities for a group of 18 countries, including developed and emerging economies. The data set covers the years 1980 to 2005 and distinguishes between four asset classes: foreign direct investment, portfolio equity, debt, and foreign exchange reserves. A number of stylised facts emerge from it. There has been a remarkable increase in interconnectivity over the past two decades. Financial links have become larger and more frequent and countries have become more open. The global financial network is centered around a small number of nodes, which have many and large links. In addition, the network exhibits ‘small-world’ properties, such as high clustering and low average path length. The combination of high interconnectivity, a small number of hubs, and ‘small-world’ properties makes for a robust-yet-fragile system, in which disturbances to the key hubs would be rapidly and widely transmitted. The global financial network is centered around the United States and the United Kingdom, which have large links and are connected to most other countries. This contrasts with the global trade network, which is arranged in three clusters: a European cluster (centered on Germany), an Asian cluster (centered on China), and an American cluster (centered on the United States).

Keywords: International Financial Networks, International Investment, Financial Liberalisation

JEL Classification: F2, F3

Suggested Citation

Kubelec, Chris and Sa, Filipa G., The Geographical Composition of National External Balance Sheets: 1980-2005 (March 23, 2010). Bank of England Working Paper No. 384. Available at SSRN: https://ssrn.com/abstract=1577143 or http://dx.doi.org/10.2139/ssrn.1577143

Chris Kubelec

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Filipa G. Sa (Contact Author)

King's College London ( email )

150 Stamford Street
London, SE1 9NN
United Kingdom

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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