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Dynamic spillover effects of global financial stress: Evidence from the quantile VAR network

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  • Long, Shaobo
  • Li, Zixuan

Abstract

This paper investigates the spillover effects of financial stress at different quantile levels across the US, China, Eurozone, Japan, UK and India using a dynamic connectedness approach based on QVAR. The findings suggest significant spillover effects of financial stress among the six countries (regions), and the spillovers in extreme markets are apparently higher than those in normal markets. The US is the main transmitter of financial stress spillovers, while Japan and India are the net receivers. Furthermore, we show that the spillover effects of financial stress are time-varying, and the connectedness at the extreme upper and lower quantiles is asymmetric. In extreme markets, the directional spillover effects of China, India and Japan are significantly enhanced. These findings provide investors, regulators and governments with systematic insights to effectively identify and prevent financial risks.

Suggested Citation

  • Long, Shaobo & Li, Zixuan, 2023. "Dynamic spillover effects of global financial stress: Evidence from the quantile VAR network," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s1057521923004611
    DOI: 10.1016/j.irfa.2023.102945
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    More about this item

    Keywords

    Financial stress; Dynamic spillover; Quantile connectedness;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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