Dynamic spillover effects of global financial stress: Evidence from the quantile VAR network

Shaobo Long and Zixuan Li

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

Abstract: This paper investigates the spillover effects of financial stress at different quantile levels across the US, China, Eurozone, Japan, UK and India using a dynamic connectedness approach based on QVAR. The findings suggest significant spillover effects of financial stress among the six countries (regions), and the spillovers in extreme markets are apparently higher than those in normal markets. The US is the main transmitter of financial stress spillovers, while Japan and India are the net receivers. Furthermore, we show that the spillover effects of financial stress are time-varying, and the connectedness at the extreme upper and lower quantiles is asymmetric. In extreme markets, the directional spillover effects of China, India and Japan are significantly enhanced. These findings provide investors, regulators and governments with systematic insights to effectively identify and prevent financial risks.

Keywords: Financial stress; Dynamic spillover; Quantile connectedness (search for similar items in EconPapers)
JEL-codes: E44 G15 O16 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:90:y:2023:i:c:s1057521923004611

DOI: 10.1016/j.irfa.2023.102945

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