Does the Spillover Index Respond Significantly to Systemic Shocks? A Bootstrap-Based Probabilistic Analysis

Matthew Greenwood-Nimmo, Evžen Kočenda and Viet Hoang Nguyen

No 2021/29, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: The spillover index developed by Diebold and Yilmaz (Economic Journal, 2009, vol. 119, pp. 158-171) is widely used to measure connectedness in economic and financial networks. Abrupt increases in the spillover index are typically thought to result from systemic events, but evidence of the statistical significance of this relationship is largely absent from the literature. We develop a newbootstrap-based technique to evaluate the probability that the value of the spillover index changes over an arbitrary time period following an exogenously defined event. We apply our framework to the original dataset studied by Diebold and Yilmaz and obtain qualified support for the notion that the spillover index increases in a timely and statistically significant manner in the wake of systemic shocks.

Keywords: Spillover index; systemic events; bootstrap-after-bootstrap procedure (search for similar items in EconPapers)
JEL-codes: C32 C58 G15 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2021-09, Revised 2021-09
New Economics Papers: this item is included in nep-isf
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https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6470 (application/pdf)

Related works:
Journal Article: Detecting statistically significant changes in connectedness: A bootstrap-based technique (2024)
Working Paper: Detecting Statistically Significant Changes in Connectedness: A Bootstrap-based Technique (2024)
Working Paper: Does the Spillover Index Respond to Adverse Shocks? A Bootstrap-Based Probabilistic Analysis (2023)
Working Paper: Does the Spillover Index Reflect Systemic Shocks? A Bootstrap-Based Probabilistic Analysis (2019)
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