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Does the Spillover Index Respond Significantly to Systemic Shocks? A Bootstrap-Based Probabilistic Analysis

Author

Listed:
  • Matthew Greenwood-Nimmo

    (Department of Economics, University of Melbourne, Centre for Applied Macroeconomic Analysis, Australian National University)

  • Evzen Kocenda

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Institute of Information Theory and Automation, Prague & CESifo, Munich & IOS, Regensburg)

  • Viet Hoang Nguyen

    (Melbourne Institute for Applied Economic and Social Research, University of Melbourne)

Abstract

The spillover index developed by Diebold and Yilmaz (Economic Journal, 2009, vol. 119, pp. 158-171) is widely used to measure connectedness in economic and financial networks. Abrupt increases in the spillover index are typically thought to result from systemic events, but evidence of the statistical significance of this relationship is largely absent from the literature. We develop a newbootstrap-based technique to evaluate the probability that the value of the spillover index changes over an arbitrary time period following an exogenously defined event. We apply our framework to the original dataset studied by Diebold and Yilmaz and obtain qualified support for the notion that the spillover index increases in a timely and statistically significant manner in the wake of systemic shocks.

Suggested Citation

  • Matthew Greenwood-Nimmo & Evzen Kocenda & Viet Hoang Nguyen, 2021. "Does the Spillover Index Respond Significantly to Systemic Shocks? A Bootstrap-Based Probabilistic Analysis," Working Papers IES 2021/29, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Sep 2021.
    • Handle: RePEc:fau:wpaper:wp2021_29
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6470
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    Cited by:

    1. Peter Albrecht & Evžen Kočenda & Evžen Kocenda, 2023. "Volatility Connectedness on the Central European Forex Markets," CESifo Working Paper Series 10728, CESifo.

    More about this item

    Keywords

    Spillover index; systemic events; bootstrap-after-bootstrap procedure;
    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
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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