Risk spillover from international financial markets and China's macro-economy: A MIDAS-CoVaR-QR model

Lu Yang, Xue Cui, Lei Yang, Shigeyuki Hamori and Xiaojing Cai

International Review of Economics & Finance, 2023, vol. 84, issue C, 55-69

Abstract: The article investigates how risk spillover from the global financial market affects real economic activity in China. We develop a MIDAS-CoVaR-QR (Mixed Data Sampling-Conditional Value at Risk-Quantile Regression) approach that combines different frequencies of data to demonstrate the possibility of risk spillover from outside markets and forecast domestic macroeconomic shocks. Further, we provide evidence that risk spillovers can forecast economic shocks in China, and their predictive power increases as the time scales increase. The empirical findings also demonstrate that risk spillovers from the global stock and commodity markets have a strong negative effect on future macro-economy. Our conclusions provide meaningful information for government and policy-makers who must consider risk spillovers from global financial markets as an important factor in creating macroeconomic policies, and in adjusting these policies across different time horizons.

Keywords: MIDAS; CoVaR; Wavelet analysis; Quantile regression; Macroeconomic shocks (search for similar items in EconPapers)
JEL-codes: E44 E51 F41 G15 G32 H63 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:84:y:2023:i:c:p:55-69

DOI: 10.1016/j.iref.2022.11.006

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