Selected Issues Papers

Financial Interconnectedness in Asia and the Pacific: Recent Shifts and Implications for Singapore

By Tristan Hennig, Ritu Basu, Cristian Alonso, Wanying Li

August 14, 2025

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Format: Chicago

Tristan Hennig, Ritu Basu, Cristian Alonso, and Wanying Li. "Financial Interconnectedness in Asia and the Pacific: Recent Shifts and Implications for Singapore", Selected Issues Papers 2025, 114 (2025), accessed August 21, 2025, https://doi.org/10.5089/9798229020077.018

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Summary

This paper examines financial interconnectedness in Asia, particularly through Singapore, and the link between trade and financial flows. It finds that Asia's financial integration lags behind its trade integration and is led by advanced economies like Singapore. The FDI network closely resembles the trade network and stands in contrast with the network for portfolio assets, which is dominated by advanced economies. Strong trade links boost FDI flows, but not portfolio flows. Singaporean banks face cross-border and FX funding risks. The authorities continue to make efforts to mitigate these risks.

Subject: Balance of payments, Commercial banks, Domestic systemically important banks, Econometric analysis, External position, Financial institutions, Financial integration, Financial markets, Financial regulation and supervision, Financial sector policy and analysis, Financial sector stability, Foreign direct investment, Gravity models, International investment position, International trade, Liquidity requirements, Portfolio investment, Trade balance

Keywords: Commercial banks, Commercial banks, Domestic systemically important banks, Domestic systemically important banks, Financial contagion, Financial integration, Financial integration, Financial sector stability, Financial sector stability, Foreign direct investment, Foreign direct investment, Geoeconomic fragmentation, Gravity models, Gravity models, International investment position, International investment position, Liquidity requirements, Liquidity requirements, Loans, Portfolio investment, Portfolio investment, Trade balance, Trade balance

Publication Details

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