2. Cross-Country Analysis of Financial Assets and Liabilities: 2005–2017

This chapter deals with a cross-country analysis of financial assets and liabilities, with a focus on the 2005–2017 period. It begins with a theoretical background on financial flows and stocks, and the role of savings and investment as it was discussed in the Feldstein-Horioka paper. The author presents financial concentration of gross financial stocks on a per capita basis, and shows an increasing difference between top 10% and bottom 10%. A major outcome of how the global economy and finance have developed over the past two decades has been the persistently high concentration of global financial flows and stocks in a small group of countries. This financial concentration within the top 20% of countries has not changed significantly since 2005. In 2005, it was 92.2%. Five years later it was 91.6%. At the end of 2017, it had increased slightly to 92.8%. The difference in financial concentration on a per capita basis between the top 10% and the lowest 10% of economies has been huge. In 2005 the ratio was 3872:1, by 2010 it had doubled, while by 2017 it had further increased to 7988:1. This chapter ends with an analysis of a special role of some small economies serving as financial conduits in global financial flows and stocks.