International monetary policy spillovers: Evidence from a time-varying parameter vector autoregression

Antonakakis, Nikolaos; Gabauer, David; Gupta, Rangan

doi:10.1016/j.irfa.2019.101382

Cited by 111 publications

(57 citation statements)

References 37 publications

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“…This enabled academic community to investigate the spillover network of EPU across various countries. In this vein, several studies have examined the cross-country network dynamics of EPU, including [8][9][10][23][24][25]. However, there is a lack of clarity about the relationship that EPU network may have with other network structures.…”

Section: The Theoretical Issuesmentioning

confidence: 99%

Role of Economic Policy Uncertainty in the Connectedness of Cross-Country Stock Market Volatilities

et al. 2020

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The implied volatility index is a forward-looking indicator of fear among stock market participants. We examine the extent to which the connectedness of fear among global stock markets is driven by the cross-country connectedness of economic policy uncertainty (EPU). We use data on stock market fear and EPU indices for 13 countries, which spans from January 2011 to December 2018. To measure the connectedness among stock market fear and EPU of our sample countries, we employ two connectedness models. A cross-sectional regression model is further employed to ascertain the extent to which EPU connectedness between two countries explains the connectedness of fear between their stock markets, while controlling for bilateral linkage and country-specific factors. We find that EPU connectedness between any two partner countries significantly drives the connectedness of fear between their stock markets. The driving potential not only holds for short- and long-term connectedness, but also after controlling for bilateral linkages (bilateral trade, geographical distance, common language) and country-specific (trade and financial openness of the transmitter country) factors indicating robustness in our results.

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Section: The Theoretical Issuesmentioning

confidence: 99%

Role of Economic Policy Uncertainty in the Connectedness of Cross-Country Stock Market Volatilities

et al. 2020

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“…All of the above further strengthen the argument in favor of TVP-VAR-generated connectedness measures. It should also be noted that, despite the rather scarce literature on TVP-VAR dynamic connectedness, studies in this area have gradually started to emerge (see, inter alia, Gabauer and Gupta 2018; Antonakakis et al 2018Antonakakis et al , 2019Antonakakis et al , 2019aAntonakakis et al , 2019bChatziantoniou and Gabauer 2019), signifying a rather promising area for future research.…”

Section: Introductionmentioning

confidence: 99%

Refined Measures of Dynamic Connectedness based on Time-Varying Parameter Vector Autoregressions

Antonakakis

Chatziantoniou

Gabauer

2020

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In this study, we enhance the dynamic connectedness measures originally introduced by Diebold and Yılmaz (2012, 2014) with a time-varying parameter vector autoregressive model (TVP-VAR) which predicates upon a time-varying variance-covariance structure. This framework allows to capture possible changes in the underlying structure of the data in a more flexible and robust manner. Specifically, there is neither a need to arbitrarily set the rolling-window size nor a loss of observations in the calculation of the dynamic measures of connectedness, as no rolling-window analysis is involved. Given that the proposed framework rests on multivariate Kalman filters, it is less sensitive to outliers. Furthermore, we emphasise the merits of this approach by conducting Monte Carlo simulations. We put our framework into practice by investigating dynamic connectedness measures of the four most traded foreign exchange rates, comparing the TVP-VAR results to those obtained from three different rolling-window settings. Finally, we propose uncertainty measures for both TVP-VAR-based and rolling-window VAR-based dynamic connectedness measures.

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“…To explore the time-varying connectedness between international stock markets during a period, including the COVID-19 pandemic, we follow the methodology of Antonakakis and Gabauer (2017) and Antonakakis, et al (2019). This methodology employs the TVP-VAR methodology of Koop and Korobilis (2014), which combined with the connectedness approach of Diebold and Yılmaz (2014) 2 .…”

Section: Tvp-var-based Dynamic Connectedness Approachmentioning

confidence: 99%

“…This methodology is employed in our study to overcome some limitations with the rolling-window procedure related to the window size choice, leading to erratic or flattened parameters, and loss of valuable observationsAntonakakis & Gabauer, 2017;Antonakakis et al, 2018;Antonakakis et al, 2019;Gabauer and Gupta, 2018;Korobilis and Yilmaz, 2018).…”

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confidence: 99%

Dynamic connectedness between stock markets in the presence of COVID-19 pandemic: Does economic policy uncertainty matter?

Youssef

Ajmi

2020

Preprint

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In this paper, we investigate the dynamic connectedness between the stock indices in the eight most endemic countries by the COVID-19 (China, Italy, France, Germany, Spain, Russia, U.S., and the U.K) as well as the effect of the economic policy uncertainty (EPU) by implementing the TVP-VAR model for daily data over the period spanning from 01/01/2015 to 05/18/2020. Results show that stock markets are highly connected during the entire period, while the dynamic spillovers reached unprecedented heights during the COVID-19 pandemic in the first quarter of the year 2020. Moreover, we find that the European stock markets transmit more spillovers to all other stock markets more than they receive (except for Italy), mainly during the outbreak of the COVID-19 pandemic. Also, findings show that the sign of the effect of the EPU on the net connectedness changes during the onset of the pandemic, showing that information spillovers from a given market may be seen as good or bad news for other markets, given the economic situation prevailing. From the results of this study, important implications can be provided for individual investors, portfolio managers, policymakers, investment banks, and central banks.

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International monetary policy spillovers: Evidence from a time-varying parameter vector autoregression

Cited by 111 publications

References 37 publications

Role of Economic Policy Uncertainty in the Connectedness of Cross-Country Stock Market Volatilities

Role of Economic Policy Uncertainty in the Connectedness of Cross-Country Stock Market Volatilities

Refined Measures of Dynamic Connectedness based on Time-Varying Parameter Vector Autoregressions

Dynamic connectedness between stock markets in the presence of COVID-19 pandemic: Does economic policy uncertainty matter?

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