Page 105 - Invited Paper Session (IPS) - Volume 2

IPS184 Celestino G. et al.
This exercise has been run with a limited number of indicators, the sector
imbalances, as a proof of concept for the proposed approach based on SOM.
Future work will extend the methodology to a larger number of indicators in
order to cover different aspects of the financial situation, e.g. indebtedness,
assets and net worth, as well as holding gain and losses, all in order to deepen
the analysis of financial developments. Such extensions will increase
remarkably the dimensionality of the exercise. To help in the analysis of the
results, the data will be pre-processed through PCA. This note also contains
an application of this extension to improve the visualisation of the results of
the clustering on the basis of sectoral net lending.

References
1. Kohonen, T. (1982): "Self-Organized Formation of Topologically Correct
Feature Maps". Biological Cybernetics. 43 (1): 59–69.
2. López Iturriaga, F. J. and I. Pastor (2013): “Self-organizing maps as a tool
to compare financial macroeconomic imbalances: The European, Spanish
and German case”. Spanish Review of Financial Economics. Vol. 11 (2):
47-94.
3. Pearson, K. (1901): "On Lines and Planes of Closest Fit to Systems of
Points in Space". Philosophical Magazine. 2 (11): 559–572.
4. Peltonen, T. and P.; Sarlin (2011): “Mapping the state of financial
stability”. European Central Bank Working Paper series no 1382.
Available at https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1382.pdf
(accessed April 2019).

92 | I S I W S C 2 0 1 9