The Effects of Financial Market Uncertainty: Does Regime Change Occur During Financial Market Crises? (in Korean)

Seewon Kim ()
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Seewon Kim: Department of Economics, Chonnam National University

Economic Analysis (Quarterly), 2019, vol. 25, issue 3, 70-99

Abstract: Using a stochastic volatility-in-mean VAR model consisting of the KOSPI index, the foreign exchange rate, the government bond rate, and the credit spread, this study investigates the effects of financial market uncertainty on financial markets. We find that higher uncertainty has recessionary effects on financial markets. The effects are especially stronger in equity markets and in won-dollar exchange markets. We also find that the effects of uncertainty become stronger during times of financial market stress compared to normal times. Finally, the results imply that financial market uncertainty may potentially affect the real sector, too.

Keywords: Uncertainty; Stochastic volatility; Economic crisis; SV-in-mean VAR model; Regime change (search for similar items in EconPapers)
JEL-codes: C32 E44 G01 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bok:journl:v:25:y:2019:i:3:p:70-99

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