An International Multi-Sectorial Approach to Financialization

MATÍAS TORCHINSKY LANDAU

Ciudad Autónoma de Buenos Aires

Conferencia; Financialization and Development in the Global South; 2019

Centre for Research on Multinational Corporations (SOMO), Centro Cultural de la Cooperación Floreal Gorini

Many studies attempted to measure the degree of financialization of an economy, generally on a country by country basis, given the heterogeneity of indicators and data availability. In this paper, we provide a simple but common measure of financialization of NFCs, namely, the participation of services provided by the financial sector (both directly and indirectly) on their value-added creation process, inspired on the methodology developed by Dávila-Fernández and Punzo (2018). In order to do this, we use inter-country input-output (ICIO) matrices developed 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 34 industries in 64 countries for the period 1995-2011.We find three main stylized 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 financialization, while manufacturing and the service sector generally presented a higher reliance on finance. Third, between 1995 and 2008, non-financial firms sharply increased their dependence on foreign financial value-added. Moreover, the origin of these exports of financial services changed in the analysed period: 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.