The global crisis has shown how a shock that originates in one country or asset class can quickly propagate to other markets and across borders. As in the closed-economy case, the nature of the balance sheet linkages between financial institutions and markets will affect the size of spillovers and their direction of propagation. At the global level, however, financial linkages and channels of propagation are more complex. Many of the data needed for identifying and tracking international linkages, even at a rudimentary level, are not (yet) available, and the institutional infrastructure for global systemic risk management is inadequate or simply non-existent. This paper highlights some of the unique challenges to global systemic risk measurement with an eye toward identifying those high-priority areas where enhancements to data are most needed.

Continue reading →