The multi-country transmission of sovereign and banking risk: a spatial vector autoregressive approach

Zhu, Bing

doi:10.1080/17421772.2018.1473890

Cited by 13 publications

(4 citation statements)

References 53 publications

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“…They highlight how, during the global financial crisis, Chinese markets experienced greater volatility in contrast to the more stable Malaysian markets. These findings inform risk management and investment strategies, emphasizing the value of sophisticated econometric tools in decoding the intricate dynamics between different stock markets under economic stress, thus enriching the financial literature (Zhu 2018).…”

Section: Inter-market Transmissions Dynamicsmentioning

confidence: 78%

Monetary Policy Spillovers and Inter-Market Dynamics Perspective of Preferred Habitat Model

Wahid,

Kowalewski

2024

Economies

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This study advances the understanding of the Preferred Habitat Model’s capacity to shed light on the inter-market transfer of mean returns and the diffusion of price volatility in Pakistani investment markets. It examines the extent to which returns in one market exert a systematic influence on returns across others under the potential sway of interest rate policy shifts, USD exchange rate volatility, and domestic inflation trends. Employing a methodological arsenal that includes the GARCH process, enhanced by Dynamic Conditional Correlations (DCC), as well as the Markov Switching Model, this research assesses the propagation of mean returns and volatility across markets. The analysis uncovers significant linkages between monetary policy and stock market indices, underscoring the profound impact of monetary policy on cross-market performance transmission. These insights are pivotal for regulators overseeing the nuanced interaction between monetary policy and market performance. They are crucial for local and international investors interested in developing economies, especially in Pakistan’s markets.

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Section: Inter-market Transmissions Dynamicsmentioning

confidence: 78%

Monetary Policy Spillovers and Inter-Market Dynamics Perspective of Preferred Habitat Model

Wahid,

Kowalewski

2024

Economies

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“…Another common shock that has been proposed is the global deterioration of financial conditions, and closely related to it, aggregate uncertainty, the level of risk aversion and market-wide liquidity in the financial markets. Zhu (2018) identifies shocks to the banking sector as the main driver of sovereign, banking, and corporate CDS spreads in 11 Eurozone countries from 2008 to 2013. Hui et al (2013) study the role of funding liquidity, risk aversion, and equity market performance and find all of them to be crucial for the determination of financial, corporate, and sovereign risks in Europe.…”

Section: Nexus Between Corporate and Sovereign Debt Markets: A Review...mentioning

confidence: 99%

Risk Spillovers between Global Corporations and Latin American Sovereigns: Global Factors Matter

Gómez-González¹,

Uribe²,

Valencia³

2022

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This paper studies volatility spillovers in credit default swaps (CDS) between the corporate sectors and Latin American countries. Daily data from October 14, 2006, to August 23, 2021, are employed. Spillovers are computed both for the raw data and for filtered series which factor out the effect of global common factors on the various CDS series. Results indicate that most spillovers occur within groups that is, within the series of sovereign CDS contracts and the price contracts of CDS issued by global corporations. However, considerable spillovers are also registered between LAC sovereigns and corporations. Interesting differences are encountered between filtered and unfiltered data. Specifically, spillovers from countries to corporations are overestimated (by about 4.3 percentage points) and spillovers from corporations to sovereigns are underestimated (by about 5.8 percentage points) when unfiltered data are used. This result calls for a revision of results obtained from studies that do not consider the role played by global common factors in system spillovers. Like in most related studies, spillovers show considerable time variation, being larger during times of financial or economic distress. When looking at total system spillovers over time, those corresponding to unfiltered series are always larger than those corresponding to filtered series. The difference between the two time series is largest in times of distress, indicating that global factors play a major role in times of crisis. Similar conclusions are derived from network analysis.

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“…The moment that spatial econometricians such as Autant-Bernard and LeSage (2019, in this issue) switch from homogeneous to heterogeneous SAR models, which they can if T is sufficiently large, there is hardly any difference (for a more detailed explanation, see Elhorst et al, 2018b). Since these two strands of literature can therefore learn from each other, Spatial Economic Analysis recently decided to also publish GVAR studies, including Zhu (2018).…”

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confidence: 99%

Raising the bar (11)

Elhorst¹,

Abreu²,

Amaral³

et al. 2019

Spatial Economic Analysis

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This editorial summarizes the papers published in issue 14(2) so as to raise the bar in applied spatial economic research and highlight new trends. The first paper deals with past and current challenges for regional science research. The second paper investigates whether people living in deprived neighbourhoods have less chance of succeeding in a job application. The third paper finds evidence that real estate firms can avoid price competition when market shares of their allies increase in the vicinity. The fourth paper is methodological: it considers a spatial autoregressive (SAR) model with heterogeneous coefficients and extensively analyzes the impact of this extension on the direct and indirect effects estimates. The fifth paper proposes an innovative method to estimate the elements of the spatial weight matrix in a spatial econometric model. The final paper is econometric-theoretical: it proposes a new generalized method of moments (GMM) estimator of the coefficients of a SAR model if the error terms are heteroskedastic of an unknown form.

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The multi-country transmission of sovereign and banking risk: a spatial vector autoregressive approach

Cited by 13 publications

References 53 publications

Monetary Policy Spillovers and Inter-Market Dynamics Perspective of Preferred Habitat Model

Monetary Policy Spillovers and Inter-Market Dynamics Perspective of Preferred Habitat Model

Risk Spillovers between Global Corporations and Latin American Sovereigns: Global Factors Matter

Raising the bar (11)

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