Financial Interconnectedness in Asia and the Pacific: Recent Shifts and Implications for Singapore

This paper examines financial interconnectedness in Asia, particularly through Singapore, and the link between trade and financial flows. It finds that Asia's financial integration lags behind its trade integration and is led by advanced economies like Singapore. The FDI network closely resembles the trade network and stands in contrast with the network for portfolio assets, which is dominated by advanced economies. Strong trade links boost FDI flows, but not portfolio flows. Singaporean banks face cross-border and FX funding risks. The authorities continue to make efforts to mitigate these risks.