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Risk-off shocks and spillovers in safe havens


  • Beirne, John
  • Sugandi, Eric


This paper examines real and financial spillovers to safe haven financial flow destinations due to risk-off shocks in global financial markets. Using country-specific structural vector autoregression (VAR) models over the period 1990 to 2021, we show that dynamics for Japan appear to be different to those of Switzerland and the US in three main ways. First, in response to risk-off episodes, the yen real effective exchange rate (REER) appreciated significantly, with the effect persisting for around 25 days. Second, no significant effects on portfolio flows to Japan are found, in spite of the exchange rate effects, suggesting a rapid adjustment of financial markets to shifts in equilibrium exchange rates. Third, negative real spillovers from risk-off shocks appear to only apply to Japan with exchange rate appreciation exacerbating declines in GDP growth. Our findings have important implications for policymakers in safe haven destinations in managing domestic financial vulnerabilities associated with risk-off episodes.

Suggested Citation

  • Beirne, John & Sugandi, Eric, 2023. "Risk-off shocks and spillovers in safe havens," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
  • Handle: RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001737
    DOI: 10.1016/j.pacfin.2023.102102

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    More about this item


    Risk-off episodes; Safe haven assets; Economic policy uncertainty;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts


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