Macro-financial risk in the South Pacific: analysing balance sheet effects for Fiji economy

The general failure of highly sophisticated models of financial risk management (based on flow variables) prompted international financial institutions, researchers, and academics to look for options beyond the traditional macroeconomic indicators. This paper contributes to the gap in the literature related to the qualitative analysis of macro-financial risks of small island developing economies. The qualitative analysis based on the aggregate balance sheet of the Fiji economy is aimed at identifying sector-specific weaknesses and their developmental paths (sources of weaknesses). It analyses various financial risks across key economic sectors (government sector, central bank, other depository corporations (ODC), other financial corporations (OFC), other non-financial corporations (NFC), other resident and non-resident) and their linkages and spill-over effects from one sector to another sector within the aggregate economy. The findings are indicative and exploratory of sector-specific weaknesses and invite further research interest in applying the framework to other similar economies in the region.

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