Pub Date : 2025-02-18DOI: 10.1016/j.najef.2025.102403
Yiguo Chen , Peng Luo , Tsangyao Chang
The Belt and Road Initiative (BRI) cooperation has created closer economic and trade relations over the past decade. This study analyzes the economic interconnectivity between BRI-participating countries and highlights key findings. The economic links between partner countries have experienced rapid and slow growth, with high connectivity levels. Macroeconomic downturns increase economic connections between countries, with a negative contagion index being higher than a positive. Land-based Silk Road countries have higher connectivity than Maritime Silk Road countries, and China and non-adjacent countries have higher connectivity than China and adjacent countries. Additionally, GDP fluctuations spillover network demonstrate the net transmitters and net receivers in the network, and the transmission channels and directions between each other. Policy-makers should consider these findings for high-quality BRI cooperation.
{"title":"Economic Nexus among the Belt and Road Initiative participating countries","authors":"Yiguo Chen , Peng Luo , Tsangyao Chang","doi":"10.1016/j.najef.2025.102403","DOIUrl":"10.1016/j.najef.2025.102403","url":null,"abstract":"<div><div>The Belt and Road Initiative (BRI) cooperation has created closer economic and trade relations over the past decade. This study analyzes the economic interconnectivity between BRI-participating countries and highlights key findings. The economic links between partner countries have experienced rapid and slow growth, with high connectivity levels. Macroeconomic downturns increase economic connections between countries, with a negative contagion index being higher than a positive. Land-based Silk Road countries have higher connectivity than Maritime Silk Road countries, and China and non-adjacent countries have higher connectivity than China and adjacent countries. Additionally, GDP fluctuations spillover network demonstrate the net transmitters and net receivers in the network, and the transmission channels and directions between each other. Policy-makers should consider these findings for high-quality BRI cooperation.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102403"},"PeriodicalIF":3.8,"publicationDate":"2025-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143444359","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-14DOI: 10.1016/j.najef.2025.102399
Yun Qin , Zitao Zhang
Oil price shocks have a significant impact on various sectors of the national economy and, together with the accompanying economic policy uncertainty, cause price fluctuations in different industries. Relying on the monthly data from February 2006 to June 2018, we explore the effects of oil price shocks and economic policy uncertainty on China’s producer price index (PPI) by employing the quantile regression model. The study reveals that oil price shocks have significantly positive impacts on China’s PPI under various quantiles, and the impacts depend on negative oil price shocks rather than positive oil price shocks, indicating the asymmetric effects of oil price shocks. Economic policy uncertainty has significantly negative effects on China’s PPI at the low quantiles, while it exerts significantly positive effects on China’s PPI at the high quantiles. The four types of economic policy uncertainty have different impacts on China’s PPI, and the impacts of fiscal policy uncertainty and trade policy uncertainty are relatively larger, indicating the heterogeneous impacts of different types of economic policy uncertainty. In addition, the effects of oil price shocks and economic policy uncertainty on classified PPI are diverse.
{"title":"Oil price shocks, economic policy uncertainty and China’s producer price index: Evidence from quantile regression analysis","authors":"Yun Qin , Zitao Zhang","doi":"10.1016/j.najef.2025.102399","DOIUrl":"10.1016/j.najef.2025.102399","url":null,"abstract":"<div><div>Oil price shocks have a significant impact on various sectors of the national economy and, together with the accompanying economic policy uncertainty, cause price fluctuations in different industries. Relying on the monthly data from February 2006 to June 2018, we explore the effects of oil price shocks and economic policy uncertainty on China’s producer price index (PPI) by employing the quantile regression model. The study reveals that oil price shocks have significantly positive impacts on China’s PPI under various quantiles, and the impacts depend on negative oil price shocks rather than positive oil price shocks, indicating the asymmetric effects of oil price shocks. Economic policy uncertainty has significantly negative effects on China’s PPI at the low quantiles, while it exerts significantly positive effects on China’s PPI at the high quantiles. The four types of economic policy uncertainty have different impacts on China’s PPI, and the impacts of fiscal policy uncertainty and trade policy uncertainty are relatively larger, indicating the heterogeneous impacts of different types of economic policy uncertainty. In addition, the effects of oil price shocks and economic policy uncertainty on classified PPI are diverse.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102399"},"PeriodicalIF":3.8,"publicationDate":"2025-02-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143444360","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-13DOI: 10.1016/j.najef.2025.102387
Ziyao Xu , Deheng Zhou , Junfeng Ma , Jing Yuan
In the context of climate risk, it is crucial to manage the risk of green financial markets well. In this paper, we construct a TVP-SV-VAR model to assess the dynamic impacts of climate uncertainty and climate policy uncertainty on low-carbon stocks and green bonds, and we use a spillover index model based on the TVP-VAR model to assess the spillover effects between them. The results show that the impacts of climate uncertainty and climate policy uncertainty on low-carbon stocks and green bonds are time-varying. In addition, green bonds are subject to smaller spillovers from climate policy uncertainty and climate uncertainty compared to low-carbon stocks. Our findings have important implications for both policymakers and investors.
{"title":"The time-varying relationship between climate uncertainty, low-carbon stocks and green bonds","authors":"Ziyao Xu , Deheng Zhou , Junfeng Ma , Jing Yuan","doi":"10.1016/j.najef.2025.102387","DOIUrl":"10.1016/j.najef.2025.102387","url":null,"abstract":"<div><div>In the context of climate risk, it is crucial to manage the risk of green financial markets well. In this paper, we construct a TVP-SV-VAR model to assess the dynamic impacts of climate uncertainty and climate policy uncertainty on low-carbon stocks and green bonds, and we use a spillover index model based on the TVP-VAR model to assess the spillover effects between them. The results show that the impacts of climate uncertainty and climate policy uncertainty on low-carbon stocks and green bonds are time-varying. In addition, green bonds are subject to smaller spillovers from climate policy uncertainty and climate uncertainty compared to low-carbon stocks. Our findings have important implications for both policymakers and investors.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102387"},"PeriodicalIF":3.8,"publicationDate":"2025-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143422662","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-12DOI: 10.1016/j.najef.2025.102389
Nader Naifar
This study investigates how the United States (US) monetary policy expectations impact various financial market segments using a quantile-on-quantile connectedness approach. It employs the USD 1-year interest rate swap (1YUSA) as a proxy for these expectations. It also examines the interconnectedness between these expectations and key financial markets, including stocks, bonds, exchange rates, and derivatives. The analysis reveals a complex, nonlinear relationship. The impact of monetary policy expectations varies significantly across different market conditions and quantiles. Strong connectedness is particularly evident during extreme market conditions, with heightened sensitivity during periods of economic uncertainty or anticipated policy shifts. The results demonstrate that monetary policy expectations disproportionately influence financial markets, particularly during market stress. The strongest effects appear in the lower quantiles of interest rates and the upper quantiles of market indices. These findings are crucial for policymakers and investors, providing deeper insights into the market’s response to monetary signals. They also enhance strategies for risk management and policy formulation in an increasingly volatile global financial environment.
{"title":"Monetary policy expectations and financial Markets: A Quantile-on-Quantile connectedness approach","authors":"Nader Naifar","doi":"10.1016/j.najef.2025.102389","DOIUrl":"10.1016/j.najef.2025.102389","url":null,"abstract":"<div><div>This study investigates how the United States (US) monetary policy expectations impact various financial market segments using a quantile-on-quantile connectedness approach. It employs the USD 1-year interest rate swap (1YUSA) as a proxy for these expectations. It also examines the interconnectedness between these expectations and key financial markets, including stocks, bonds, exchange rates, and derivatives. The analysis reveals a complex, nonlinear relationship. The impact of monetary policy expectations varies significantly across different market conditions and quantiles. Strong connectedness is particularly evident during extreme market conditions, with heightened sensitivity during periods of economic uncertainty or anticipated policy shifts. The results demonstrate that monetary policy expectations disproportionately influence financial markets, particularly during market stress. The strongest effects appear in the lower quantiles of interest rates and the upper quantiles of market indices. These findings are crucial for policymakers and investors, providing deeper insights into the market’s response to monetary signals. They also enhance strategies for risk management and policy formulation in an increasingly volatile global financial environment.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102389"},"PeriodicalIF":3.8,"publicationDate":"2025-02-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143422092","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-10DOI: 10.1016/j.najef.2025.102385
Yinhong Yao , Xiuwen Chen , Zhensong Chen
The increasingly complex international environment poses more challenges in accurately forecasting the portfolio risk of international financial assets. Therefore, this paper proposes a generalized autoregressive conditional heteroscedasticity mixed data sampling (GARCH-MIDAS)-R-Vine copula model to forecast the portfolio tail risks, Value at Risk (VaR) and Expected Shortfall (ES), of international financial assets by comprehensively considering the internal complex dependences and external impact of low-frequency macroeconomic factors. Based on the daily prices of Bitcoin, crude oil, gold, seven international stock assets, one global and seven specific monthly economic policy uncertainty (EPU) indexes ranging from January 2011 to August 2022, we find that the proposed model could increase the forecasting accuracy of portfolio tail risk under the optimal information ratio (IR) criterion. Internal high-dimensional dependences can be captured by the flexible R-Vine copula model with 16 kinds of bivariate copula functions, and the external EPU factors observe a significant impact on the corresponding financial assets. Moreover, the CAC 40, the DAX, and the S&P 500 are three dominant financial assets, and Bitcoin and gold are suitable for risk investment and risk hedging assets respectively. These results are beneficial for both risk management and portfolio optimization in the global financial market.
{"title":"Portfolio tail risk forecasting for international financial assets: A GARCH-MIDAS-R-Vine copula model","authors":"Yinhong Yao , Xiuwen Chen , Zhensong Chen","doi":"10.1016/j.najef.2025.102385","DOIUrl":"10.1016/j.najef.2025.102385","url":null,"abstract":"<div><div>The increasingly complex international environment poses more challenges in accurately forecasting the portfolio risk of international financial assets. Therefore, this paper proposes a generalized autoregressive conditional heteroscedasticity mixed data sampling (GARCH-MIDAS)-R-Vine copula model to forecast the portfolio tail risks, Value at Risk (VaR) and Expected Shortfall (ES), of international financial assets by comprehensively considering the internal complex dependences and external impact of low-frequency macroeconomic factors. Based on the daily prices of Bitcoin, crude oil, gold, seven international stock assets, one global and seven specific monthly economic policy uncertainty (EPU) indexes ranging from January 2011 to August 2022, we find that the proposed model could increase the forecasting accuracy of portfolio tail risk under the optimal information ratio (IR) criterion. Internal high-dimensional dependences can be captured by the flexible R-Vine copula model with 16 kinds of bivariate copula functions, and the external EPU factors observe a significant impact on the corresponding financial assets. Moreover, the CAC 40, the DAX, and the S&P 500 are three dominant financial assets, and Bitcoin and gold are suitable for risk investment and risk hedging assets respectively. These results are beneficial for both risk management and portfolio optimization in the global financial market.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102385"},"PeriodicalIF":3.8,"publicationDate":"2025-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143395500","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-09DOI: 10.1016/j.najef.2025.102398
Michael Kunkler
The Economist’s Big Mac index measures the external purchasing power of a currency relative to a common numéraire currency. The Big Mac index is based on the economic theory of absolute purchasing power parity. There are two versions of the index, namely, the Raw Big Mac index and the GDP-adjusted Big Mac index. The bilateral valuations for both versions are conditional on the common numéraire currency. For example, the common numéraire currency is always at fair value, whereas the valuations of the other currencies are measured relative to the common numéraire currency. This paper extends previous research by providing a theoretical framework to calculate exact multilateral valuations for a system of currencies. The methodological extension sheds light on a number of linkages between the bilateral valuations and the multilateral valuations for both versions of the Big Mac index.
{"title":"The Big Mac index: An exact multilateral clarification","authors":"Michael Kunkler","doi":"10.1016/j.najef.2025.102398","DOIUrl":"10.1016/j.najef.2025.102398","url":null,"abstract":"<div><div>The Economist’s Big Mac index measures the external purchasing power of a currency relative to a common numéraire currency. The Big Mac index is based on the economic theory of absolute purchasing power parity. There are two versions of the index, namely, the Raw Big Mac index and the GDP-adjusted Big Mac index. The bilateral valuations for both versions are conditional on the common numéraire currency. For example, the common numéraire currency is always at fair value, whereas the valuations of the other currencies are measured relative to the common numéraire currency. This paper extends previous research by providing a theoretical framework to calculate exact multilateral valuations for a system of currencies. The methodological extension sheds light on a number of linkages between the bilateral valuations and the multilateral valuations for both versions of the Big Mac index.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102398"},"PeriodicalIF":3.8,"publicationDate":"2025-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143444361","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-07DOI: 10.1016/j.najef.2025.102383
Fabian Alex
Using the modeling framework of Stiglitz and Weiss (1981), we show that – perhaps surprisingly – there is no influence of average project risk on the capital market equilibrium. The savings interest rate fully determines the amount of credit rationing and the nature of an equilibrium (adverse selection, two-prices etc.). This rate is, in turn, fully determined by the relative probabilities of success of firms’ projects (and, thus, repayment of their debt). Hence, making capital markets overall “less risky”, which may for example be the case when financial markets become greener, does not alleviate concerns of asymmetric information. The result holds both for cases of hidden information and for those of hidden actions.
{"title":"Project risk neutrality in the context of asymmetric information","authors":"Fabian Alex","doi":"10.1016/j.najef.2025.102383","DOIUrl":"10.1016/j.najef.2025.102383","url":null,"abstract":"<div><div>Using the modeling framework of <span><span>Stiglitz and Weiss (1981)</span></span>, we show that – perhaps surprisingly – there is no influence of average project risk on the capital market equilibrium. The savings interest rate fully determines the amount of credit rationing and the nature of an equilibrium (adverse selection, two-prices etc.). This rate is, in turn, fully determined by the relative probabilities of success of firms’ projects (and, thus, repayment of their debt). Hence, making capital markets overall “less risky”, which may for example be the case when financial markets become greener, does not alleviate concerns of asymmetric information. The result holds both for cases of hidden information and for those of hidden actions.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102383"},"PeriodicalIF":3.8,"publicationDate":"2025-02-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143351154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-06DOI: 10.1016/j.najef.2025.102388
Xin Li , Yan Tong , Guoquan Xu
Using a sample of Chinese A-share listed firms from 2015 to 2021, this paper finds that corporate ESG disclosure reduces the likelihood of regulatory inquiries. Channel analysis demonstrates that corporate ESG disclosure lowers regulatory inquiry risk by reducing agency costs and business risks. This relationship is more pronounced in firms that have less disagreement in ESG ratings, have higher levels of digital transformation, operate in highly polluting industries, or are situated in more favorable institutional environments. Further analysis indicates that corporate ESG disclosure is associated with a lower probability of delayed responses by firms, the need for verification opinions from intermediary institutions by stock exchanges, and inquiries regarding risk information from stock exchanges. The study expands the literature on the determinants of regulatory inquiries. It also sheds light on corporations’ improvement of information disclosure.
{"title":"Corporate ESG disclosure and regulatory inquiry: Evidence from comment letters on annual reports","authors":"Xin Li , Yan Tong , Guoquan Xu","doi":"10.1016/j.najef.2025.102388","DOIUrl":"10.1016/j.najef.2025.102388","url":null,"abstract":"<div><div>Using a sample of Chinese A-share listed firms from 2015 to 2021, this paper finds that corporate ESG disclosure reduces the likelihood of regulatory inquiries. Channel analysis demonstrates that corporate ESG disclosure lowers regulatory inquiry risk by reducing agency costs and business risks. This relationship is more pronounced in firms that have less disagreement in ESG ratings, have higher levels of digital transformation, operate in highly polluting industries, or are situated in more favorable institutional environments. Further analysis indicates that corporate ESG disclosure is associated with a lower probability of delayed responses by firms, the need for verification opinions from intermediary institutions by stock exchanges, and inquiries regarding risk information from stock exchanges. The study expands the literature on the determinants of regulatory inquiries. It also sheds light on corporations’ improvement of information disclosure.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102388"},"PeriodicalIF":3.8,"publicationDate":"2025-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143386640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-06DOI: 10.1016/j.najef.2025.102384
Elena Márquez-de-la-Cruz , Ana R. Martínez-Cañete , Belén Nieto
This paper evaluates the cross-asset co-movements of the liquidity of stocks and corporate bonds issued by the same firm, revealing a positive and significant contemporaneous relationship between the liquidity of the two assets. This finding is robust to different bond sample selection criteria, alternative methodologies, and various proxies for liquidity. Moreover, the intensity of said relationship depends on both bond and firm risk characteristics. Specifically, we find that the liquidity of bonds in the non-institutional segment of the market and the liquidity of those issued by firms with high financial risk are more strongly connected to stock liquidity shocks.
{"title":"Stock and corporate bond liquidity: When having the same issuer induces commonality","authors":"Elena Márquez-de-la-Cruz , Ana R. Martínez-Cañete , Belén Nieto","doi":"10.1016/j.najef.2025.102384","DOIUrl":"10.1016/j.najef.2025.102384","url":null,"abstract":"<div><div>This paper evaluates the cross-asset co-movements of the liquidity of stocks and corporate bonds issued by the same firm, revealing a positive and significant contemporaneous relationship between the liquidity of the two assets. This finding is robust to different bond sample selection criteria, alternative methodologies, and various proxies for liquidity. Moreover, the intensity of said relationship depends on both bond and firm risk characteristics. Specifically, we find that the liquidity of bonds in the non-institutional segment of the market and the liquidity of those issued by firms with high financial risk are more strongly connected to stock liquidity shocks.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102384"},"PeriodicalIF":3.8,"publicationDate":"2025-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143422663","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-04DOI: 10.1016/j.najef.2025.102379
Guangyi Yang , Yong Li , Xiaoxing Liu
As global financial markets become more integrated, the interconnected characteristics among these markets have become increasingly pronounced, making the network of interconnections among national financial markets a significant carrier of systemic financial risk contagion. Against the backdrop of frequent systemic financial risks, exploring the relationships among financial risks across countries in extreme market conditions holds substantial policy significance. To this end, this paper employs Lasso quantile regression to capture tail event linkages and explore the dependencies of tail events (TE) between Chinese macroeconomic conditions and major financial institutions (FI). Having verified the model’s capability in effectively predicting financial risks, a network of financial risk connectivity including China and G20 countries is established using the quantile-based TVP − VAR method. The research finds that, firstly, in extreme market conditions, the spillover effects of financial risks are significantly intensified. At this time, the spillover effects of financial risks from developed countries are significantly greater than those from developing countries. Secondly, there is significant asymmetry in financial risk spillovers among different countries, and the left-tail risk spillover effects are higher than the right-tail under various extreme market conditions, indicating that under negative economic or financial news, the speed and impact of risk propagation are wider. Thirdly, under extreme market conditions, the financial risk connectivity of G20 countries is primarily driven by information transmission mechanisms, mainly through capital flows and cross-border credit, whereas under normal market conditions, the transmission of financial risks among nations is mainly due to deeper structural changes within their financial markets.
{"title":"Asymmetry and determinants of financial connectivity in G20: Evidence from a quantile-based and lasso regression analysis","authors":"Guangyi Yang , Yong Li , Xiaoxing Liu","doi":"10.1016/j.najef.2025.102379","DOIUrl":"10.1016/j.najef.2025.102379","url":null,"abstract":"<div><div>As global financial markets become more integrated, the interconnected characteristics among these markets have become increasingly pronounced, making the network of interconnections among national financial markets a significant carrier of systemic financial risk contagion. Against the backdrop of frequent systemic financial risks, exploring the relationships among financial risks across countries in extreme market conditions holds substantial policy significance. To this end, this paper employs Lasso quantile regression to capture tail event linkages and explore the dependencies of tail events (TE) between Chinese macroeconomic conditions and major financial institutions (FI). Having verified the model’s capability in effectively predicting financial risks, a network of financial risk connectivity including China and G20 countries is established using the quantile-based TVP − VAR method. The research finds that, firstly, in extreme market conditions, the spillover effects of financial risks are significantly intensified. At this time, the spillover effects of financial risks from developed countries are significantly greater than those from developing countries. Secondly, there is significant asymmetry in financial risk spillovers among different countries, and the left-tail risk spillover effects are higher than the right-tail under various extreme market conditions, indicating that under negative economic or financial news, the speed and impact of risk propagation are wider. Thirdly, under extreme market conditions, the financial risk connectivity of G20 countries is primarily driven by information transmission mechanisms, mainly through capital flows and cross-border credit, whereas under normal market conditions, the transmission of financial risks among nations is mainly due to deeper structural changes within their financial markets.</div></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"77 ","pages":"Article 102379"},"PeriodicalIF":3.8,"publicationDate":"2025-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143349274","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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