The New Challenges of Greater Financial Complexity in Central America: A Network Analysis

Nov 2015
External financing flows to the region increased due to higher liquidity in international markets and low financing costs, and also thanks to the region’s stability relative to developed economies. In this regard, the analysis presented here shows that the influx of funds from abroad has effectively modified credit and debit patterns in the entire region, leading tovulnerability in some cases. These vulnerabilities, associated with the intensification in financial operations and with the presence of sectors of high systemic importance, could eventually lead to imbalances that could ultimately spread negative effects through the rest of the economy. The lessons of this technical note are that the intensification of financial relationships between sectors must be accompanied by a multi-sectoral agenda for action.