Interconnectedness of systemic risk in the Chinese economy: the Granger causality and CISS indicator approach

Omid Farkhondeh Rouz (), Hossein Sohrabi Vafa, Arash Sioofy Khoojine and Sajjad Pashay Amiri
Additional contact information
Omid Farkhondeh Rouz: University of Tabriz
Hossein Sohrabi Vafa: Allameh Tabataba’i’University
Arash Sioofy Khoojine: Yibin University
Sajjad Pashay Amiri: Tarbiat Modares University

Risk Management, 2024, vol. 26, issue 2, No 4, 24 pages

Abstract: Abstract In this study, systemic risk in the Chinese economy between 2012 and 2023 has been investigated. The entire dataset is divided into three time windows to help comprehend the dynamics of financial markets. Deploying the tools of graph theory and Granger causality, as well as the composite indicator of systemic stress (CISS) on five financial markets including money market, bond market, equity market, foreign exchange market, and financial intermediaries, the systemic risk propagation has been analyzed among these financial markets. The results reveal that the increase in volatility in the foreign exchange market can be attributed to the rise in volatility and risk in the equity market, bond market, and financial intermediaries. Additionally, the examination of the financial markets shows significant fluctuations in the years 2015 and 2022. Consequently, examining these two periods determined that financial turbulence in the money market was the primary source of systemic risk. Moreover, it can have widespread propagation effects on other financial markets. These findings also emphasized the importance of monitoring and controlling the money market and its interactions with other parts of the financial system to reduce propagation risks.

Keywords: Systemic risk; Risk propagation; CISS indicator; Granger causality; Financial turbulence; Chinese economy (search for similar items in EconPapers)
JEL-codes: B41 C12 E47 G10 G28 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1057/s41283-024-00142-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:pal:risman:v:26:y:2024:i:2:d:10.1057_s41283-024-00142-8

Ordering information: This journal article can be ordered from
https://www.palgrave.com/gp/journal/41283

DOI: 10.1057/s41283-024-00142-8

Access Statistics for this article

Risk Management is currently edited by Igor Loncarski

More articles in Risk Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().