Driver Countries in Global Banking Network

Abstract

We analyze the network of cross-border bank lending connections among countries from 1977 to 2018. The network includes core countries that lend money and peripheral countries that borrow money from core countries. In nowadays highly connected banking network, financial crisis that start from a country can spread to other countries very fast and cause global affects. We use principal component analysis (PCA) to find the influential lending (core) countries in this network over the years and clusters of borrowing (peripheral) countries related to these impactful core countries. We find three clusters of peripheral countries, with some constant and some changing members over time. This can be a sign of changes in the financial or political interactions among countries. The changes in the role of core countries and how these roles get affected by the important financial crisis in the past decades is investigated. Among 31 of core countries, 7 countries have a partially or constantly important role in the network including France, United Kingdom, United States, Japan, Germany, Chinese Taipei and Switzerland.