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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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    1. repec:ucm:wpaper:04-15 is not listed on IDEAS
    2. Vašíček, Bořek & Žigraiová, Diana & Hoeberichts, Marco & Vermeulen, Robert & Šmídková, Kateřina & de Haan, Jakob, 2017. "Leading indicators of financial stress: New evidence," Journal of Financial Stability, Elsevier, vol. 28(C), pages 240-257.
    3. repec:eee:reveco:v:55:y:2018:i:c:p:130-144 is not listed on IDEAS
    4. Fernández-Rodríguez, Fernando & Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2015. "Volatility spillovers in EMU sovereign bond markets," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 337-352.
    5. repec:eee:finana:v:51:y:2017:i:c:p:69-81 is not listed on IDEAS
    6. Alper Gormus, N., 2016. "Do different time-horizons in volatility have any significance for the emerging markets?," Economics Letters, Elsevier, vol. 145(C), pages 29-32.
    7. repec:taf:applec:v:50:y:2018:i:39:p:4234-4249 is not listed on IDEAS
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    9. Tom Pak Wing FongAuthor-Workplace-Name: Research Department, Hong Kong Monetary Authority & Ka Fai LiAuthor-Workplace-Name: Research Department, Hong Kong Monetary Authority & Angela Kin Wan Sze, 2016. "Measuring Spillovers between the US and Emerging Markets," Working Papers 082016, Hong Kong Institute for Monetary Research.
    10. Syed Hassan & Sarosh Shabi & Taufiq Choudhry, 2018. "US Economic Uncertainty, EU Business Cycles and the Global Financial Crisis," Working Papers 2018-05, Swansea University, School of Management.
    11. Apostolakis, George, 2016. "Spreading crisis: Evidence of financial stress spillovers in the Asian financial markets," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 542-551.
    12. Fernández-Rodríguez, Fernando & Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2016. "Using connectedness analysis to assess financial stress transmission in EMU sovereign bond market volatility," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 43(C), pages 126-145.
    13. Tiwari, Aviral Kumar & Cunado, Juncal & Gupta, Rangan & Wohar, Mark E., 2018. "Volatility spillovers across global asset classes: Evidence from time and frequency domains," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 194-202.
    14. Reboredo, Juan C. & Uddin, Gazi Salah, 2016. "Do financial stress and policy uncertainty have an impact on the energy and metals markets? A quantile regression approach," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 284-298.
    15. repec:eee:ecmode:v:68:y:2018:i:c:p:96-116 is not listed on IDEAS
    16. Julián Andrada-Félix & Adrian Fernandez-Perez & Simón Sosvilla-Rivero, 2018. "Fear connectedness among asset classes," Applied Economics, Taylor & Francis Journals, vol. 50(39), pages 4234-4249, August.
    17. Apostolakis, George & Papadopoulos, Athanasios P., 2015. "Financial stress spillovers across the banking, securities and foreign exchange markets," Journal of Financial Stability, Elsevier, vol. 19(C), pages 1-21.
    18. Samargandi, Nahla & Kutan, Ali M., 2016. "Private credit spillovers and economic growth: Evidence from BRICS countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 44(C), pages 56-84.
    19. Tamakoshi, Go & Hamori, Shigeyuki, 2016. "Time-varying co-movements and volatility spillovers among financial sector CDS indexes in the UK," Research in International Business and Finance, Elsevier, vol. 36(C), pages 288-296.

    More about this item

    Keywords

    Financial stability; Financial stress indices; Dynamic conditional correlations; Stress spillover index; Financial crises;

    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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