The effects of economic and financial shocks on private investment: A wavelet study of return and volatility spillovers

Gvs Chiranjivi and Rudra Sensarma

International Review of Financial Analysis, 2023, vol. 90, issue C

Abstract: This paper examines the linkage between private investments and shocks in economic and financial indicators. Using data from India, we study the return and volatility spillovers from crude price, credit availability, real exchange rate, inflation, output gap, government spending, and economic policy uncertainty to private investments. We combine the ARMA-GARCH model with wavelet multiresolution analysis to capture the multiscale features of return and volatility spillovers among the time series. Our findings uncover spillovers in the time-scale decomposed series that are otherwise not observable in the original data, thereby throwing new light on the private investment-macroeconomic shock relationship. Private investment receives return spillovers from all variables at lower frequencies. Volatility spillovers from credit availability, exchange rate, output gap, and public investment exist at higher frequencies. The findings are robust to different forecast horizons, window sizes, frequency of data observation, and methodology of volatility extraction.

Keywords: Private investment cycles; Volatility spillovers; Discrete wavelet transform; Multi resolution analysis; Conditional volatility; ARMA-GARCH (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521923004520
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:90:y:2023:i:c:s1057521923004520

DOI: 10.1016/j.irfa.2023.102936

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().