International Trade and Financial Integration : a Weighted Network Analysis

Giorgio Fagiolo (1) , Javier Reyes (2) , Stefano Schiavo (3)

1 LEM - Laboratory of Economics and Management
2 Department of Economics
3 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

In this paper we compare the degree and patterns of trade and financial integration exploiting network analysis. We start from a simple binary analysis and then move to a more appropriate weighted approach, presenting a detailed overview of international goods and financial markets integration, and compare their main characteristics. Moving from binary to weighted analysis changes considerably the properties of the networks, and with them the picture of the integration process. Limiting to a binary approach can thus lead to a misrepresentation of the underlying economic phenomena. We find that the trade network is almost fully connected while international financial integration is less pervasive. Also, regional links continue to play a relevant role.

Domains: Economics and Finance

Giorgio Fagiolo, Javier Reyes, Stefano Schiavo. International Trade and Financial Integration : a Weighted Network Analysis. 2007. ⟨hal-00973118⟩