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Financial stress spillovers in advanced economies

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  • Apostolakis, George
  • Papadopoulos, Athanasios P.

Abstract

In this study, we examine financial stress co-movements and spillovers among the G7 economies by employing a Financial Stress Index as a proxy variable and accounting for financial instability. To examine the interdependence of financial stress, we parse the dynamic conditional correlations of financial stress among these countries for the 1981–2009 period. In addition, we present spillover indices and plots of financial stress that indicate financial stress innovations and spillover dynamics, respectively. Our empirical results suggest a positive association of financial stress co-movements and spillovers with both financial crises and uncertainty. In general, our findings provide a clear view of the transmission of financial stress during important stressful episodes, suggesting the existence of an increased interplay among the financial markets.

Suggested Citation

  • Apostolakis, George & Papadopoulos, Athanasios P., 2014. "Financial stress spillovers in advanced economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 128-149.
    • Handle: RePEc:eee:intfin:v:32:y:2014:i:c:p:128-149
    DOI: 10.1016/j.intfin.2014.06.001
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    More about this item

    Keywords

    Financial stability; Financial stress indices; Dynamic conditional correlations; Stress spillover index; Financial crises;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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