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Input-Output-Based Measures of Systemic Importance

SAFE Working Paper No. 29

41 Pages Posted: 28 Aug 2013 Last revised: 12 Jun 2014

Iñaki Aldasoro

Bank for International Settlements (BIS)

Ignazio Angeloni

Italian Finance Ministry - International Financial Relations

Date Written: August 28, 2013

Abstract

The analyses of intersectoral linkages of Leontief (1941) and Hirschman (1958) provide a natural way to study the transmission of risk among interconnected banks and to measure their systemic importance. In this paper we show how classic input-output analysis can be applied to banking and how to derive six indicators that capture different aspects of systemic importance, using a simple numerical example for illustration. We also discuss the relationship with other approaches, most notably network centrality measures, both formally and by means of a simulated network.

Keywords: banks, input-output, systemic risk, too-interconnected-to-fail, networks, interbank markets

JEL Classification: C67, G00, G01, G20

Suggested Citation

Aldasoro, Iñaki and Angeloni, Ignazio, Input-Output-Based Measures of Systemic Importance (August 28, 2013). SAFE Working Paper No. 29. Available at SSRN: https://ssrn.com/abstract=2317299 or http://dx.doi.org/10.2139/ssrn.2317299

Iñaki Aldasoro (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Ignazio Angeloni

Italian Finance Ministry - International Financial Relations ( email )

Via XX Settembre 97
Rome, Rome 00187
Italy

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