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Macro-uncertainty and financial stress spillovers in the Eurozone

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  • Cipollini, Andrea
  • Mikaliunaite, Ieva

Abstract

This paper studies macro-uncertainty and financial distress spillovers within the Eurozone. We propose a novel methodology to derive the indices of spillovers, by using a Global Vector autoregressive model fitted to data sampled at mixed-frequencies. We find that macro-uncertainty and financial stress are relatively disconnected in the Eurozone. We also show that connectedness between core and periphery Eurozone countries mainly operates through financial stress and it decreases since the outbreak of the Eurozone sovereign debt crisis (with an increasing role played by peripheral countries). As a result, investors and policymakers should monitor separately macro-uncertainty and financial stress. Finally, we find that the mixed-frequency data should be taken into account in this context, otherwise, the spillovers can be underestimated.

Suggested Citation

  • Cipollini, Andrea & Mikaliunaite, Ieva, 2020. "Macro-uncertainty and financial stress spillovers in the Eurozone," Economic Modelling, Elsevier, vol. 89(C), pages 546-558.
  • Handle: RePEc:eee:ecmode:v:89:y:2020:i:c:p:546-558
    DOI: 10.1016/j.econmod.2019.11.017
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    2. Zhang, Hongwei & Wang, Peijin, 2021. "Does Bitcoin or gold react to financial stress alike? Evidence from the U.S. and China," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 629-648.

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    More about this item

    Keywords

    Connectedness; Global VAR; Mixed frequency data; Financial stress; Macro-uncertainty;
    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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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