An evolution of global and regional banking networks: A focus on Japanese banks’ international expansion

Michael Harrison, Jouchi Nakajima and Mimoza Shabani

Journal of International Financial Markets, Institutions and Money, 2023, vol. 83, issue C

Abstract: The significant increase in cross-border lending of Japanese banks since the Great Financial Crisis of 2007–2009 is documented to have both a global and regional dimension. This paper investigates how this expansion affects domestic financial stability. Based, on a network-based approach we show that Japanese banks have a prominent role in the global banking network in providing liquidity via cross-border lending. We also apply the Spinglass methodology to detect communities formed within the network and show that Japan is highly connected and has a central role in the East-Asian regional banking network. As a further step in the analysis, we employ a novel spatial econometric approach, namely, a time-varying spatial autoregressive (SAR) model to analyze the evolution of the network’s spillover effects over time. Our empirical analysis points to the positive spillover effects of banking stability arising from cross-border lending activities. However, the results suggest that the spillovers are more pronounced at the global level than regional. Furthermore, we find that the role of Japanese banks in the global banking network has more than doubled since 2014.

Keywords: Banking networks; Spillover effect; Spatial autoregression (search for similar items in EconPapers)
JEL-codes: C23 F34 G21 R11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:83:y:2023:i:c:s1042443122001895

DOI: 10.1016/j.intfin.2022.101717

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