 Global financial interconnectedness: a non-linear assessment of the uncertainty channelBertrand Candelon, Laurent Ferrara and Marc Joëts Applied Economics, 2021, vol. 53, issue 25, 2865-2887 Abstract: The role of uncertainty in the global economy is now widely recognized by policy-makers but its specific effects on the international financial system are less understood. In this paper, we assess the impact of uncertainty fluctuations on the interconnectedness within the international system of equity prices. In this respect, we extend the measure of connectedness put forward by Diebold and Yilmaz by allowing for non-linear effects through the estimation of a non-linear Threshold VAR model whose regimes depend on the level on uncertainty. Results show that high uncertainty tends to generate more connectedness among equity indexes of a set of advanced and emerging countries. From an economic policy point of view, this result suggests that in the presence of high uncertainty, an adverse financial shock in a specific country is likely to propagate more widely and more strongly to the whole financial system. This result advocates for a close real-time monitoring of uncertainty measures. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:53:y:2021:i:25:p:2865-2887 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2020.1870651 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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