Measuring Global Financial Linkages: A Network Entropy Approach

This paper measures the diversity of highly-connected financial networks using network entropy, and policy-related findings emerge from this research. With respect to the time variation of network entropy, international diversification of the global financial network constructed from foreign claims...

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Bibliographic Details
Published inSustainability Vol. 11; no. 17; p. 4691
Main Authors Lee, Daeyup, Park, Hail
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 01.09.2019
Subjects
Banks
Diversification
Economic crisis
Entropy
Initial public offerings
International finance
Securities markets
Sustainability
United States > US
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Summary:This paper measures the diversity of highly-connected financial networks using network entropy, and policy-related findings emerge from this research. With respect to the time variation of network entropy, international diversification of the global financial network constructed from foreign claims of international banks has decreased since the financial crisis of 2007–2008, while foreign claims among 20 reporting countries have concentrated more on core countries, such as the US and UK, since 2009. This change is more vividly captured by network entropy due to an unprecedented drop in the measurement. The results suggest that network entropy has promising potential in the financial market.
ISSN:2071-1050
2071-1050
DOI:10.3390/su11174691