Impacts of China's crash on Asia-Pacific financial integration: Volatility interdependence, information transmission and market co-movement

Abdullahi D. Ahmed and Rui Huo

Economic Modelling, 2019, vol. 79, issue C, 28-46

Abstract: This paper examines the price and volatility dynamics between China and major stock markets in the Asia-Pacific, investigating the effects of the Chinese stock market crash (2015–2016) for the first time. Employing the Bayesian VAR and BEKK GARCH, we observe that price and volatility spillover behaviours are different during the stable and stress periods. Particularly, price spillovers from China to other regional markets are more significant during a bullish period, showing that ‘good news’ emanating from China has strong impacts on its neighbours during better market condition. In the turbulent period, we observe strong shock spillover effects and enhanced volatility spillovers from China to most Asia-Pacific stock markets. This is because China, as an important trading partner and strategic financial centre shows to exert significant influence on the Asia-Pacific region through various economic channels. We also find that the Asia-Pacific stock markets spill over their shocks to China during the crisis, indicating that China is becoming more integrated with the regional financial markets.

Keywords: Price and volatility spillovers; BEKK GARCH; Financial crisis; Asia-Pacific region (search for similar items in EconPapers)
JEL-codes: C58 F36 F65 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:79:y:2019:i:c:p:28-46

DOI: 10.1016/j.econmod.2018.09.029

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