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Sunday, April 10, 2011

Financial Contagion - An Interactive Graphic

Source: Washington Post
What could be more fun than wrapping up a rainy, blustery weekend than by playing around with an interactive graphic from The Washington Post that nicely illustrates potential financial contagion? This, of course, is much in the news these days as countries wonder, for example, about the impact of Europe's debt problems as well as the U.S. grappling with its debt problems.

The graphic is Europe's financial contagion by  Neil Irwin. CLICK TO ENLARGE . By clicking on the link, you'll see the so-called PIIGS on the left. Running your cursor over the various countries, you can see loan exposures as well as trade flows as a percentage of GDP. For example, Ireland's loans to Greece amount to 4.6% of GDP. Next, by running your cursor over Ireland, you find that Portugal is its biggest creditor with loans /GDP in excess of 8%. In this way, you can trace a contagion effect of one country's problems affecting others.

Note that the extent of the impacts is illustrated by the thickness of the arrows. DIY Investor is admittedly impressed by people's creativity in presenting data in the internet age.

DIY Investor believes that financial contagion gained prominence in 1997 when Thailand experienced currency problems. Most analysts saw it as a non-event - after all, Thailand is a small country on the global stage. Thailand's problems however quickly spread and eventually affected South America.


  1. Unless you are North Korea, one countries problem is going to affect other nations. Not an insulated world anymore!

  2. Interesting stuff... I wonder if we could also trace the correlation between the Fed's actions and inflation in offshore economies.

  3. @Kevin It would be interesting but difficult to do. It's not easy to separate out the influences on a country's rate of inflation and what exactly is causing it.