Spillover dynamics in DeFi, G7 banks, and equity markets during global crises: A TVP-VAR analysis

Ijaz Younis, Himani Gupta, Anna Min Du, Waheed Ullah Shah and Waqas Hanif

Research in International Business and Finance, 2024, vol. 70, issue PB

Abstract: Decentralized finance (DeFi) has become of significant interest for investors in both the financial and digital sectors. We use a time-varying parameter vector autoregression (TVP-VAR) approach to estimate the static and dynamic connections between and within DeFi, G7 banking, and equity markets. We focus on critical events such as the COVID-19 pandemic, the cryptocurrency bubble, and the Russia-Ukraine conflict. The results highlight interconnectedness and significant spillovers within and between the markets, especially during the COVID-19 pandemic. Notably, there were significant spillover effects from the G7 banking and equity markets to Japan and DeFi assets. The findings demonstrate a robust connection between DeFi platforms, G7 banking, and stock markets throughout these tumultuous periods. Policymakers, investors, and entrepreneurs are recommended to keep a close eye on changes in traditional banking and equity markets to adjust the risk of DeFi assets.

Keywords: DeFi; G7 banks and equity markets; Crypto bubble; Ukrainian War; COVID-19 (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:70:y:2024:i:pb:s0275531924001983

DOI: 10.1016/j.ribaf.2024.102405

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