Systemic importance of financial services and insurance sectors: a world input–output network analysis

Tao SUN*

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

Abstract

This study examines the systemic importance of the financial services sector in the global input–output network between 2000 and 2014. To measure the systemic importance of the financial services and insurance sectors of 13 major economies with the Financial Stability Board identified Globally Systemically Important Banks and Globally Systemically Important Insurers, we construct a local and global shock contagion index using the partial extraction technique in input–output analysis. We demonstrate how local supply reductions in the insurance or other financial services sectors can have a global spillover effect on GDP. We also find that the systemic importance of the financial services and insurance sectors varies over time depending on the size and structure of the economy in different economies (such as the U.S. and China). Additionally, we investigate the impact of simultaneous supply shocks that have originated in the insurance and other financial services (e.g., banking) sectors of different economies. Empirical evidence suggests that simultaneous supply shocks in the financial services sectors in certain economies could contribute to, at least a large portion of, economic downturns, as observed during the 2008 Global Financial Crisis.
Original languageEnglish
Number of pages34
JournalThe Geneva Papers on Risk and Insurance - Issues and Practice
Early online date30 Aug 2022
DOIs
Publication statusE-pub ahead of print - 30 Aug 2022

Bibliographical note

Funding Information:
This research is partially funded by the Lingnan University Direct Grant (Grant Number: DR20B2).

Publisher Copyright:
© 2022, The Geneva Association.

Keywords

  • Hypothetical extraction
  • Input–output analysis
  • Network analysis
  • Systemic risk

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