IDEAS home Printed from https://ideas.repec.org/a/spr/sjecst/v156y2020i1d10.1186_s41937-019-0049-z.html
   My bibliography  Save this article

Real-financial connectedness in the Swiss economy

Author

Listed:
  • Erhan Uluceviz

    (Gebze Technical University)

  • Kamil Yilmaz

    (Koç University)

Abstract

We study macro-financial linkages and their importance within the Swiss economy from a network perspective. First, we investigate the real-financial connectedness in the Swiss economy, using the KOF economic barometer, obtained from real and financial variables, and, the real activity index (RAI), we distilled from a small set of real variables, as two alternative proxies for the real side. Whereas the KOF-barometer-based analysis shows that both sides transmit sizeable shocks to each other without one dominating the other, the RAI-based analysis shows that in the aggregate, the financial side turns out to be the net shock transmitter to the real sector. In the second part, we focus on the relative importance of financial markets as shock propagators using a network centrality measure. We find that 2008–2009 recession in Switzerland and the Swiss National Bank’s (SNB) exchange rate policy changes in 2011 and 2015 have significantly altered the way the shocks are transmitted across the two sides of the economy. During 2009–2011, stock, bond, and foreign exchange (FX) markets, in descending order, played important roles as shock propagators. Following the SNB’s 2015 policy decision to discontinue the lower bound for the EUR/CHF exchange rate, FX market has become equally important as the stock market but more important than the bond market as a shock propagator.

Suggested Citation

  • Erhan Uluceviz & Kamil Yilmaz, 2020. "Real-financial connectedness in the Swiss economy," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-20, December.
    • Handle: RePEc:spr:sjecst:v:156:y:2020:i:1:d:10.1186_s41937-019-0049-z
    DOI: 10.1186/s41937-019-0049-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s41937-019-0049-z
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s41937-019-0049-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Schmidbauer, Harald & Rösch, Angi & Uluceviz, Erhan, 2017. "Frequency aspects of information transmission in a network of three western equity markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 486(C), pages 933-946.
    2. Harald Schmidbauer & Angi Roesch & Erhan Uluceviz, 2013. "Market Connectedness: Spillovers, Information Flow, and Relative Market Entropy," Koç University-TUSIAD Economic Research Forum Working Papers 1320, Koc University-TUSIAD Economic Research Forum.
    3. Alain Galli & Christian Hepenstrick & Rolf Scheufele, 2019. "Mixed-Frequency Models for Tracking Short-Term Economic Developments in Switzerland," International Journal of Central Banking, International Journal of Central Banking, vol. 15(2), pages 151-178, June.
    4. Klaus Abberger & Michael Graff & Boriss Siliverstovs & Jan-Egbert Sturm, 2014. "The KOF Economic Barometer, Version 2014," KOF Working papers 14-353, KOF Swiss Economic Institute, ETH Zurich.
    5. Francis X. Diebold & Kamil Yilmaz, 2009. "Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets," Economic Journal, Royal Economic Society, vol. 119(534), pages 158-171, January.
    6. Markus K. Brunnermeier & Yuliy Sannikov, 2014. "A Macroeconomic Model with a Financial Sector," American Economic Review, American Economic Association, vol. 104(2), pages 379-421, February.
    7. Clements, Michael P. & Hendry, David F. (ed.), 2011. "The Oxford Handbook of Economic Forecasting," OUP Catalogue, Oxford University Press, number 9780195398649, Decembrie.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Yu-Lun & Mo, Wan-Shin & Qin, Rong-Ling & Yang, J. Jimmy, 2023. "Return spillover across China's financial markets," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    2. Hedi Ben Haddad & Imed Mezghani & Imed Medhioub & Sohale Altamimi, 2024. "Spillover effects of disaggregated macroeconomic uncertainties on U.S. real activity: evidence from the quantile vector autoregressive connectedness approach," Empirical Economics, Springer, vol. 66(2), pages 829-858, February.
    3. Uluceviz, Erhan & Yilmaz, Kamil, 2021. "Measuring real–financial connectedness in the U.S. economy," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    4. Albrecht, Peter & Kočenda, Evžen, 2025. "Event-driven changes in volatility connectedness in global forex markets," Journal of Multinational Financial Management, Elsevier, vol. 77(C).
    5. Johnson A. Oliyide & Oluwasegun B. Adekoya & Muhammad A. Khan, 2021. "Economic policy uncertainty and the volatility connectedness between oil shocks and metal market: An extension," International Economics, CEPII research center, issue 167, pages 136-150.
    6. Albrecht, Peter & Kočenda, Evžen, 2024. "Volatility connectedness on the central European forex markets," International Review of Financial Analysis, Elsevier, vol. 93(C).
    7. Marius Cristian Acatrinei, 2020. "Spillover index for European business cycle," Journal of Financial Studies, Institute of Financial Studies, vol. 9(5), pages 49-57, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mehmet Balcilar & Zeynel Abidin Ozdemir & Huseyin Ozdemir & Gurcan Aygun & Mark E. Wohar, 2022. "Effectiveness of monetary policy under the high and low economic uncertainty states: evidence from the major Asian economies," Empirical Economics, Springer, vol. 63(4), pages 1741-1769, October.
    2. Bhattarai, Keshab & Mallick, Sushanta K. & Yang, Bo, 2021. "Are global spillovers complementary or competitive? Need for international policy coordination," Journal of International Money and Finance, Elsevier, vol. 110(C).
    3. Alain Kabundi & Asithandile Mbelu, 2021. "Estimating a time-varying financial conditions index for South Africa," Empirical Economics, Springer, vol. 60(4), pages 1817-1844, April.
    4. Irina Balteanu & Aitor Erce, 2018. "Linking Bank Crises and Sovereign Defaults: Evidence from Emerging Markets," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(4), pages 617-664, December.
    5. Covi, Giovanni & Gorpe, Mehmet Ziya & Kok, Christoffer, 2021. "CoMap: Mapping Contagion in the Euro Area Banking Sector," Journal of Financial Stability, Elsevier, vol. 53(C).
    6. Moratis, Georgios & Sakellaris, Plutarchos, 2021. "Measuring the systemic importance of banks," Journal of Financial Stability, Elsevier, vol. 54(C).
    7. Massimo Minesso Ferrari, 2020. "The Real Effects of Endogenous Defaults on the Interbank Market," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(3), pages 411-439, November.
    8. Giglio, Stefano & Kelly, Bryan & Pruitt, Seth, 2016. "Systemic risk and the macroeconomy: An empirical evaluation," Journal of Financial Economics, Elsevier, vol. 119(3), pages 457-471.
    9. Alain Galli, 2018. "Which Indicators Matter? Analyzing the Swiss Business Cycle Using a Large-Scale Mixed-Frequency Dynamic Factor Model," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 14(2), pages 179-218, November.
    10. Donal Smith, 2016. "The International Impact of Financial Shocks: A Global VAR and Connectedness Measures Approach," Discussion Papers 16/07, Department of Economics, University of York.
    11. Uluceviz, Erhan & Yilmaz, Kamil, 2021. "Measuring real–financial connectedness in the U.S. economy," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    12. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    13. Harald Schmidbauer & Angi Rösch & Erhan Uluceviz & Narod Erkol, 2016. "Are American and European equity markets in phase? --- Frequency aspects of return and volatility spillovers," EcoMod2016 9559, EcoMod.
    14. Tihana Skrinjaric, 2022. "Macroeconomic effects of systemic stress: a rolling spillover index approach," Public Sector Economics, Institute of Public Finance, vol. 46(1), pages 109-140.
    15. Angi Roesch & Harald Schmidbauer & Erhan Uluceviz, 2014. "Frequency Aspects Of Information Transmission In Networks Of Equity Markets," EcoMod2014 7200, EcoMod.
    16. Seiler, Volker, 2024. "The relationship between Chinese and FOB prices of rare earth elements – Evidence in the time and frequency domain," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 160-179.
    17. Yu-Hsiu Lin & Len-Kuo Hu, 2015. "The cyclicality of bank regulation in a general economic framework," Applied Economics, Taylor & Francis Journals, vol. 47(53), pages 5791-5804, November.
    18. Tobias Adrian & Nina Boyarchenko, 2013. "Intermediary balance sheets," Staff Reports 651, Federal Reserve Bank of New York.
    19. Nikolay Hristov & Markus Roth, 2019. "Uncertainty Shocks and Financial Crisis Indicators," CESifo Working Paper Series 7839, CESifo.
    20. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sjecst:v:156:y:2020:i:1:d:10.1186_s41937-019-0049-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.