Input-Output-based Measures of Systemic Importance

Aldasoro, Iñaki and Angeloni, Ignazio (2013): Input-Output-based Measures of Systemic Importance.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: banks, input-output, systemic risk, too-interconnected-to fail, networks, interbank markets
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C67 - Input-Output Models; G - Financial Economics > G0 - General > G00 - General; G - Financial Economics > G0 - General > G01 - Financial Crises; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General

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