Abstract
The analyses of intersectoral linkages of Leontief [The Structure of the American Economy: 1919–1929, 1941] and Hirschman [The Strategy of Economic Development, 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 elements from 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.
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