Monetary Policy, Industry Heterogeneity and Systemic Risk—Based on a High Dimensional Network Analysis

Yaya Su, Zhehao Huang and Benjamin M. Drakeford
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Yaya Su: College of Finance and Statistics, Hunan University, Changsha 410006, China
Zhehao Huang: Guangzhou International Institute of Finance, Guangzhou University, Guangzhou 510006, China
Benjamin M. Drakeford: Economics and Finance Subject Group, Portsmouth Business School, University of Portsmouth, Portsmouth PO13DE, UK

Sustainability, 2019, vol. 11, issue 22, 1-15

Abstract: We utilized a high dimensional financial network to investigate the systemic risk contagion between different industries in China and to explore the impacts of monetary policy and industry heterogeneity factors. The empirical results suggest that the total level of systemic risk increased quite significantly during the 2008 global crisis and the 2015–2016 Stock Market Disaster. The energy, material, industrial, and financial sectors are the top systemic risk contributors. Industry heterogeneity variables such as the leverage ratio, book-to-market ratio, return on assets (ROA) and size have significant impacts on the systemic risk, but their effects on the systemic risk contribution are more pronounced than those on the systemic risk sensitivity. Moreover, monetary policy can effectively suppress the systemic risk diffusion derived from the leverage ratio. These results are essential for investors and regulators of risk management.

Keywords: systemic risk; monetary policy; industry heterogeneity; high dimensional financial network (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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