Investigating the dynamics of crisis transmission channels: A comparative analysis

Ying Yuan, Haiying Wang and Tianyang Wang

Journal of International Money and Finance, 2023, vol. 135, issue C

Abstract: This paper analyzes the growing complexity of cross-market interdependence during financial crises. From macroeconomic, investor constraint, and quantitative easing policy perspectives, we investigate crisis transmission channels across major stock markets by comparing the 2008 global financial crisis, the 2020 COVID-19 crisis, and the 2022 Russo-Ukrainian crisis. We find that lower-tail contagion is mainly driven by the wealth effect and upper-tail contagion is mainly driven by the portfolio rebalancing, and shed light on the underlying dynamic mechanisms, such as credit spreads, risk aversion, economic policy uncertainty, and quantitative easing policy. Additionally, we show the impact of macroeconomic fundamentals, investor sentiment, and quantitative easing policy on lower-tail and upper-tail financial contagion.

Keywords: Financial contagion channel; Wealth effect; Portfolio rebalancing (search for similar items in EconPapers)
JEL-codes: C32 C51 E42 G15 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:135:y:2023:i:c:s026156062300058x

DOI: 10.1016/j.jimonfin.2023.102857

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