- The financial crisis has highlighted the importance of identifying connections between sectors of the economy so as to analyse potential contagion risk.
- Research finds that the Irish economy is highly interconnected at a sectoral level. Based on activities of multinational corporations, non-resident entities have significant links to the domestic economy.
- Irish households have a high net exposure to non-resident entities through their holdings in insurance and pension fund products.
An Economic Letter by Mary Cussen Identifying Inter-Sectoral Exposures in Ireland using Network Analysis has been published. The Economic Letter examines the financial linkages between the economic sectors of the Irish economy using network analysis. The research finds that the Irish economy is much more connected than the average euro area economy, reflecting, in part, that the Irish economy is generally smaller and more open than average.
The analysis also shows that households hold significant assets with insurance corporations and pension funds, which means Irish households could be quite exposed to risks in the rest of the world through investment in these products. This underlines the importance of continued surveillance of this channel.
Note: The views expressed in this paper are those of the author only, and do not necessarily reflect the views of the Central Bank of Ireland.