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The varying spillover of U.S. systemic risk: A functional-coefficient cointegration approach

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  • Li, Li
  • Tu, Yundong

Abstract

We examine the spillover effects of systemic risk from U.S. to U.K. based on a functional-coefficient cointegration approach. We find that the international spillover of systemic risk is varying as the global financial cycle evolves. When the global financial market is booming or busting, the systemic risk spillover effect could be elevated. The forecasting experiment suggests that the systemic risk spillover through the global financial factor can help improve the forecasting accuracy of future systemic risk in U.K.

Suggested Citation

  • Li, Li & Tu, Yundong, 2022. "The varying spillover of U.S. systemic risk: A functional-coefficient cointegration approach," Economics Letters, Elsevier, vol. 212(C).
    • Handle: RePEc:eee:ecolet:v:212:y:2022:i:c:s0165176522000192
    DOI: 10.1016/j.econlet.2022.110306
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    References listed on IDEAS

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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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