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Investigating the dynamics of crisis transmission channels: A comparative analysis

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  • Yuan, Ying
  • Wang, Haiying
  • Wang, Tianyang

Abstract

This paper analyzes the growing complexity of cross-market interdependence during financial crises. From macroeconomic, investor constraint, and quantitative easing policy perspectives, we investigate crisis transmission channels across major stock markets by comparing the 2008 global financial crisis, the 2020 COVID-19 crisis, and the 2022 Russo-Ukrainian crisis. We find that lower-tail contagion is mainly driven by the wealth effect and upper-tail contagion is mainly driven by the portfolio rebalancing, and shed light on the underlying dynamic mechanisms, such as credit spreads, risk aversion, economic policy uncertainty, and quantitative easing policy. Additionally, we show the impact of macroeconomic fundamentals, investor sentiment, and quantitative easing policy on lower-tail and upper-tail financial contagion.

Suggested Citation

  • Yuan, Ying & Wang, Haiying & Wang, Tianyang, 2023. "Investigating the dynamics of crisis transmission channels: A comparative analysis," Journal of International Money and Finance, Elsevier, vol. 135(C).
    • Handle: RePEc:eee:jimfin:v:135:y:2023:i:c:s026156062300058x
    DOI: 10.1016/j.jimonfin.2023.102857
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    More about this item

    Keywords

    Financial contagion channel; Wealth effect; Portfolio rebalancing;
    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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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