An international multi-sectoral approach to financialisation

Many studies attempted to measure the degree of financialisation of an economy, generally on a country-by-country basis, given the heterogeneity of indicators and data availability. In this paper, a simple but common measure of financialisation of non-financial corporations (NFCs) is developed, namely, the participation of services provided by the financial sector (both directly and indirectly) on their value-added creation process, inspired by the methodology developed by Dávila-Fernández and Punzo (2020). To do this, we use the inter-country input-output (ICIO) matrices built by the OECD, which allow us to understand the role played by the financial sector (local or foreign) in the ‘value-added production function’ of NFCs from 45 industries, in 67 countries for the period 1995–2018. We find three main stylised facts. First, the financial sector plays a relevant role in the value-added creation process of NFCs, and its importance has increased during the last years, although there is high diversity among countries. Second, this process has been heterogeneous when different productive sectors are considered. Primary industries evidenced a low degree of financialisation, while manufacturing and the service sector generally presented a higher reliance on finance. Third, between 1995 and the global financial crisis, NFCs increased their dependence on foreign financial value-added, followed by a partial reversion of this process. Moreover, the origin of these exports of financial services changed: while some traditional financial hubs such as the UK, Switzerland and Japan decreased their importance as providers of financial value-added to NFCs, China, Russia and India became important global players.