Pub Date : 2024-11-01DOI: 10.1016/j.econmod.2024.106930
Lijin Xiang, Chao Feng, Zumian Xiao, Jianjian Liu
This study investigates the impact of Central Bank Digital Currency (CBDC) on macroeconomic fluctuations under various external shocks, expanding the research on macroeconomic effects of CBDC issuance. We develop a dynamic stochastic general equilibrium (DSGE) model to examine the effects of different external shocks on the macroeconomy under three scenarios with varying CBDC rules. Our analysis reveals that, in the presence of CBDC, macroeconomic variables are generally more volatile after exogenous shocks than in the absence of CBDC, while highlighting the crucial role of monetary policy in stabilizing the macroeconomy. Liquidity and substitution effects are identified as main drivers of the results. These findings offer new insights into the welfare improving effect of interest-bearing CBDC, carrying significant implications for the effective implementation of monetary policy.
{"title":"The impact of central bank digital currency on macroeconomic dynamics: A DSGE analysis","authors":"Lijin Xiang, Chao Feng, Zumian Xiao, Jianjian Liu","doi":"10.1016/j.econmod.2024.106930","DOIUrl":"10.1016/j.econmod.2024.106930","url":null,"abstract":"<div><div>This study investigates the impact of Central Bank Digital Currency (CBDC) on macroeconomic fluctuations under various external shocks, expanding the research on macroeconomic effects of CBDC issuance. We develop a dynamic stochastic general equilibrium (DSGE) model to examine the effects of different external shocks on the macroeconomy under three scenarios with varying CBDC rules. Our analysis reveals that, in the presence of CBDC, macroeconomic variables are generally more volatile after exogenous shocks than in the absence of CBDC, while highlighting the crucial role of monetary policy in stabilizing the macroeconomy. Liquidity and substitution effects are identified as main drivers of the results. These findings offer new insights into the welfare improving effect of interest-bearing CBDC, carrying significant implications for the effective implementation of monetary policy.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106930"},"PeriodicalIF":4.2,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142578232","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-30DOI: 10.1016/j.econmod.2024.106931
Donato Masciandaro , Riccardo Russo
This study examines the trade-offs that central banks would face if they began addressing climate change. The various instruments available to address climate-related risks overlap with those currently used for monetary and macroprudential purposes. However, most existing literature fails to adequately consider the political-economy aspect of this phenomenon. This creates a bias in favor of interventions by central banks. Using a political principal–agent setting that eliminates this bias, we examine the conditions under which the central bank architecture could effectively pursue this goal without compromising its core mandates. The effectiveness of central banks depends on their ability to calibrate, maintain independence and demonstrate a degree of activism.
{"title":"Monetary and macroprudential policies: How to Be green? A political-economy approach","authors":"Donato Masciandaro , Riccardo Russo","doi":"10.1016/j.econmod.2024.106931","DOIUrl":"10.1016/j.econmod.2024.106931","url":null,"abstract":"<div><div>This study examines the trade-offs that central banks would face if they began addressing climate change. The various instruments available to address climate-related risks overlap with those currently used for monetary and macroprudential purposes. However, most existing literature fails to adequately consider the political-economy aspect of this phenomenon. This creates a bias in favor of interventions by central banks. Using a political principal–agent setting that eliminates this bias, we examine the conditions under which the central bank architecture could effectively pursue this goal without compromising its core mandates. The effectiveness of central banks depends on their ability to calibrate, maintain independence and demonstrate a degree of activism.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106931"},"PeriodicalIF":4.2,"publicationDate":"2024-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142571235","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"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 : 2024-10-30DOI: 10.1016/j.econmod.2024.106920
Gilles Dufrénot , William Ginn , Marc Pourroy
This study investigates how El Niño–Southern Oscillation (ENSO) climate patterns affect global economic conditions. Prior research suggests that ENSO phases, particularly El Niño, influence economic outcomes, but with limited consensus on their broader macroeconomic impacts. Using a novel monthly dataset from 20 economies, covering 80% of global output from 1999 to 2022, we employ a global augmented vector autoregression with local projections (GAVARLP) model. The empirical findings suggest that El Niño boosts output with minimal inflationary effects, reducing global economic policy uncertainty, while La Niña raises food inflation, which can amplify aggregate inflation as a “second-round” effect, amplifying uncertainty. These findings shed light on the transmission channels of climate shocks and highlight the significant role of ENSO in shaping global economic conditions, emphasizing why climate shocks should be a concern for policy markers.
{"title":"Climate pattern effects on global economic conditions","authors":"Gilles Dufrénot , William Ginn , Marc Pourroy","doi":"10.1016/j.econmod.2024.106920","DOIUrl":"10.1016/j.econmod.2024.106920","url":null,"abstract":"<div><div>This study investigates how El Niño–Southern Oscillation (ENSO) climate patterns affect global economic conditions. Prior research suggests that ENSO phases, particularly El Niño, influence economic outcomes, but with limited consensus on their broader macroeconomic impacts. Using a novel monthly dataset from 20 economies, covering 80% of global output from 1999 to 2022, we employ a global augmented vector autoregression with local projections (GAVARLP) model. The empirical findings suggest that El Niño boosts output with minimal inflationary effects, reducing global economic policy uncertainty, while La Niña raises food inflation, which can amplify aggregate inflation as a “second-round” effect, amplifying uncertainty. These findings shed light on the transmission channels of climate shocks and highlight the significant role of ENSO in shaping global economic conditions, emphasizing why climate shocks should be a concern for policy markers.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106920"},"PeriodicalIF":4.2,"publicationDate":"2024-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142571236","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"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 : 2024-10-29DOI: 10.1016/j.econmod.2024.106926
Jin Guo, Xiaoqian Wen
This study examines the impact of option listing on the volatility of underlying commodity futures markets in China, filling a gap in research on the trading effects of options. We construct the counterfactual volatility for these optioned commodity futures and estimate the average treatment effect of option listing. Our findings reveal a reduction in the volatility of underlying commodity futures after the option listing, a result that withstands various robustness checks. Furthermore, we find the decreased volatility is associated with a lower trading volume in these markets. The declined trading volume may stem from informed traders diverting to option markets and from noise traders being more cautious about trading. Our paper highlights distinct outcomes of option listing, particularly pertinent to emerging derivative markets.
{"title":"Option listing and underlying commodity futures volatility in China","authors":"Jin Guo, Xiaoqian Wen","doi":"10.1016/j.econmod.2024.106926","DOIUrl":"10.1016/j.econmod.2024.106926","url":null,"abstract":"<div><div>This study examines the impact of option listing on the volatility of underlying commodity futures markets in China, filling a gap in research on the trading effects of options. We construct the counterfactual volatility for these optioned commodity futures and estimate the average treatment effect of option listing. Our findings reveal a reduction in the volatility of underlying commodity futures after the option listing, a result that withstands various robustness checks. Furthermore, we find the decreased volatility is associated with a lower trading volume in these markets. The declined trading volume may stem from informed traders diverting to option markets and from noise traders being more cautious about trading. Our paper highlights distinct outcomes of option listing, particularly pertinent to emerging derivative markets.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106926"},"PeriodicalIF":4.2,"publicationDate":"2024-10-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142587177","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-28DOI: 10.1016/j.econmod.2024.106918
Povilas Lastauskas, Julius Stakėnas
Do labor market policies initiated in periods of loose monetary policy yield different outcomes from those introduced when monetary tightening prevails? Using data from 11 euro-area members up to 2010 – and extending to 17 countries up to 2020 – we analyze three labor market policies: replacement rates, spending on active labor market policies (ALMPs), and employment protection. We find that these policies deliver different macroeconomic outcomes in low- and high-interest rate environments. In particular, ALMPs reduce unemployment if implemented under a loose monetary policy but not otherwise, whereas higher employment protection delivers expansionary effects under a tight monetary policy. These findings highlight that the effectiveness of labor market policies is significantly influenced by the monetary policy environment, emphasizing the need for coordinated policy design. Methodologically, we contribute by proposing to average local projections using Mallow’s criterion, allowing for inferences that are robust to mis-specification and accommodate non-linearities.
{"title":"Labor market policies in high- and low-interest rate environments: Evidence from the euro area","authors":"Povilas Lastauskas, Julius Stakėnas","doi":"10.1016/j.econmod.2024.106918","DOIUrl":"10.1016/j.econmod.2024.106918","url":null,"abstract":"<div><div>Do labor market policies initiated in periods of loose monetary policy yield different outcomes from those introduced when monetary tightening prevails? Using data from 11 euro-area members up to 2010 – and extending to 17 countries up to 2020 – we analyze three labor market policies: replacement rates, spending on active labor market policies (ALMPs), and employment protection. We find that these policies deliver different macroeconomic outcomes in low- and high-interest rate environments. In particular, ALMPs reduce unemployment if implemented under a loose monetary policy but not otherwise, whereas higher employment protection delivers expansionary effects under a tight monetary policy. These findings highlight that the effectiveness of labor market policies is significantly influenced by the monetary policy environment, emphasizing the need for coordinated policy design. Methodologically, we contribute by proposing to average local projections using Mallow’s <span><math><msub><mrow><mi>C</mi></mrow><mrow><mi>p</mi></mrow></msub></math></span> criterion, allowing for inferences that are robust to mis-specification and accommodate non-linearities.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106918"},"PeriodicalIF":4.2,"publicationDate":"2024-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142571309","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-26DOI: 10.1016/j.econmod.2024.106924
Debao Hu , Chenzhe Zhai , Xiaoyan Wang , Xiaobao Huang
This study investigates the impact of household risk attitude on consumption, a subject of enduring interest to academics and policymakers. Existing literature indicates that household consumption is influenced by financial and psychological factors, yet the role of household risk attitude remains underexplored. Utilizing panel data from the China Household Finance Survey, this research employs ordinary least squares regression to analyze the relationship between household risk attitude and consumption behavior. The results reveal that risk-averse households exhibit lower levels of consumption. Mechanisms including household entrepreneurship, social interactions, and consumption credit are identified as significant channels through which risk attitude affects consumption. The robustness of these findings is confirmed through instrumental variable analysis, with additional heterogeneity observed across regions, cities, and household leverage levels. These insights underscore the importance of incorporating household risk attitude into policy frameworks to stimulate consumption.
{"title":"Does household risk attitude affect consumption expenditure? Evidence from Chinese urban households","authors":"Debao Hu , Chenzhe Zhai , Xiaoyan Wang , Xiaobao Huang","doi":"10.1016/j.econmod.2024.106924","DOIUrl":"10.1016/j.econmod.2024.106924","url":null,"abstract":"<div><div>This study investigates the impact of household risk attitude on consumption, a subject of enduring interest to academics and policymakers. Existing literature indicates that household consumption is influenced by financial and psychological factors, yet the role of household risk attitude remains underexplored. Utilizing panel data from the China Household Finance Survey, this research employs ordinary least squares regression to analyze the relationship between household risk attitude and consumption behavior. The results reveal that risk-averse households exhibit lower levels of consumption. Mechanisms including household entrepreneurship, social interactions, and consumption credit are identified as significant channels through which risk attitude affects consumption. The robustness of these findings is confirmed through instrumental variable analysis, with additional heterogeneity observed across regions, cities, and household leverage levels. These insights underscore the importance of incorporating household risk attitude into policy frameworks to stimulate consumption.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106924"},"PeriodicalIF":4.2,"publicationDate":"2024-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142554462","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-25DOI: 10.1016/j.econmod.2024.106919
Deng-Kui Si , Mingyue Meng , Jiaming Wang , Fuyou Zhou
Labor income share is crucial for maintaining social stability and promoting sustainable economic development, capturing the attention of both academics and policymakers. Existing studies focus on the impact of industry transformation and corporate operation on labor income share. Utilizing a quasi-natural experiment based on the implementation of the Shanghai–Hong Kong and Shenzhen–Hong Kong Stock Connect policies, this study identifies the causal effect of capital market liberalization on corporate labor income share in China. The results show that capital market liberalization enhances labor income share by optimizing human capital, improving corporate governance, and promoting market competition. The findings provide essential implications for advancing income distribution and optimizing the structure of China's capital market.
{"title":"Does capital market liberalization increase corporate labor income share? Evidence from China","authors":"Deng-Kui Si , Mingyue Meng , Jiaming Wang , Fuyou Zhou","doi":"10.1016/j.econmod.2024.106919","DOIUrl":"10.1016/j.econmod.2024.106919","url":null,"abstract":"<div><div>Labor income share is crucial for maintaining social stability and promoting sustainable economic development, capturing the attention of both academics and policymakers. Existing studies focus on the impact of industry transformation and corporate operation on labor income share. Utilizing a quasi-natural experiment based on the implementation of the Shanghai–Hong Kong and Shenzhen–Hong Kong Stock Connect policies, this study identifies the causal effect of capital market liberalization on corporate labor income share in China. The results show that capital market liberalization enhances labor income share by optimizing human capital, improving corporate governance, and promoting market competition. The findings provide essential implications for advancing income distribution and optimizing the structure of China's capital market.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106919"},"PeriodicalIF":4.2,"publicationDate":"2024-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142554461","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-23DOI: 10.1016/j.econmod.2024.106917
Subal C. Kumbhakar , Yulu Wang
During the COVID-19 pandemic, the precision in reporting infectious cases and fatalities presents significant challenges, exacerbated by rapid transmission rates and overburdened healthcare infrastructures. Officially reported cases occasionally exhibit zero increments, which is likely to be under-reported. Some models exclude zero values from the sample, creating a sample selectivity problem. In contrast, alternative models substitute zero values with a constant to enable logarithmic transformations. Since both modeling approaches are wrong, in this study, we address this issue by extending the Tobit model to account for both under-reporting and random noise. Analyzing data from 61 countries between January 1, 2020, and November 3, 2020, we explore external factors that explain country-specific under-reporting. Our findings confirm the existence of under-reporting across countries and reveal that cases reported with zero increments actually involve non-zero infectious instances. This novel methodology enriches future under-reporting analyses.
{"title":"Global COVID-19 under-reporting: A Tobit model","authors":"Subal C. Kumbhakar , Yulu Wang","doi":"10.1016/j.econmod.2024.106917","DOIUrl":"10.1016/j.econmod.2024.106917","url":null,"abstract":"<div><div>During the COVID-19 pandemic, the precision in reporting infectious cases and fatalities presents significant challenges, exacerbated by rapid transmission rates and overburdened healthcare infrastructures. Officially reported cases occasionally exhibit zero increments, which is likely to be under-reported. Some models exclude zero values from the sample, creating a sample selectivity problem. In contrast, alternative models substitute zero values with a constant to enable logarithmic transformations. Since both modeling approaches are wrong, in this study, we address this issue by extending the Tobit model to account for both under-reporting and random noise. Analyzing data from 61 countries between January 1, 2020, and November 3, 2020, we explore external factors that explain country-specific under-reporting. Our findings confirm the existence of under-reporting across countries and reveal that cases reported with zero increments actually involve non-zero infectious instances. This novel methodology enriches future under-reporting analyses.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106917"},"PeriodicalIF":4.2,"publicationDate":"2024-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142554463","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-22DOI: 10.1016/j.econmod.2024.106923
Jinting Dong , Lianchao Yu
This study examined the relationship between CEO foreign experience and corporate environmental violations using data from heavy-polluting China-listed firms. The impact of CEO foreign experience on corporate environmental violations remains underexplored. Existing studies primarily examine managerial foreign experience in corporate environmentally responsible behavior, relying on firms' voluntary disclosure or third-party agencies’ evaluations. However, data on corporate environmental violations issued by governments is more reliable. Our findings indicate firms led by CEOs with foreign experience exhibited less likelihood and frequency of environmental violations. The negative correlation was more pronounced when firms were under weaker institutional pressure from central and local governments, poor environmental judicial quality, and adequate public participation. Enhanced environmental ethics and general competency are potential mechanisms through which CEO foreign experience affects corporate environmental behavior. The findings highlight the significance of CEO foreign experience in shaping corporate environmental violations, providing essential policy implications for emerging market stakeholders.
本研究利用中国重污染上市公司的数据，研究了首席执行官的外国经历与企业环境违法行为之间的关系。首席执行官的外国经历对企业环境违法行为的影响仍未得到充分探讨。现有研究主要依靠企业的自愿披露或第三方机构的评价来考察企业环境责任行为中管理者的涉外经历。然而，由政府发布的企业环境违规数据更为可靠。我们的研究结果表明，由具有国外经验的首席执行官领导的企业，其环境违规的可能性和频率都较低。当企业受到的来自中央和地方政府的制度压力较弱、环境司法质量较差以及公众参与充分时，这种负相关更为明显。增强环境道德和综合能力是 CEO 国外经验影响企业环境行为的潜在机制。研究结果凸显了首席执行官的海外经历对企业环境违法行为的重要影响，为新兴市场利益相关者提供了重要的政策启示。
{"title":"Impact of CEO foreign experience on corporate environmental violations: The role of enhanced environmental ethics and general competency","authors":"Jinting Dong , Lianchao Yu","doi":"10.1016/j.econmod.2024.106923","DOIUrl":"10.1016/j.econmod.2024.106923","url":null,"abstract":"<div><div>This study examined the relationship between CEO foreign experience and corporate environmental violations using data from heavy-polluting China-listed firms. The impact of CEO foreign experience on corporate environmental violations remains underexplored. Existing studies primarily examine managerial foreign experience in corporate environmentally responsible behavior, relying on firms' voluntary disclosure or third-party agencies’ evaluations. However, data on corporate environmental violations issued by governments is more reliable. Our findings indicate firms led by CEOs with foreign experience exhibited less likelihood and frequency of environmental violations. The negative correlation was more pronounced when firms were under weaker institutional pressure from central and local governments, poor environmental judicial quality, and adequate public participation. Enhanced environmental ethics and general competency are potential mechanisms through which CEO foreign experience affects corporate environmental behavior. The findings highlight the significance of CEO foreign experience in shaping corporate environmental violations, providing essential policy implications for emerging market stakeholders.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106923"},"PeriodicalIF":4.2,"publicationDate":"2024-10-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142531054","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-22DOI: 10.1016/j.econmod.2024.106921
Pascal Xavier Gnagne, Beatrice D. Simo-Kengne, Mathias Mandla Manguzvane
This study examines the spillover effects of sovereign risk on international stock markets using a dynamic spatial Durbin model (SDM) on a panel of forty countries from 2009Q1 to 2024Q2. The findings show that an increase in sovereign risk, as measured by CDS spreads, leads to a significant decrease in both local and foreign stock prices, with 0.027 percent reductions across foreign markets on average. These effects are transmitted through geographical, and economic and financial channels, with exchange rates, gross fixed capital formation, and industrial production playing crucial roles in influencing stock market performance. Additionally, the negative (positive) spillover effects from rising gross fixed capital formation and sovereign risk (industrial production) demonstrate how foreign markets are more impacted than domestic ones. The study highlights the interconnected nature of global financial markets, reinforcing the need for coordinated international policy responses to mitigate the transmission of sovereign risk across borders. These findings provide new insights into how global economic factors influence stock market volatility, particularly through specific transmission channels, underscoring the importance of multilateral collaboration in managing sovereign risk.
{"title":"The spillover and contagion effects of sovereign risk on stock markets","authors":"Pascal Xavier Gnagne, Beatrice D. Simo-Kengne, Mathias Mandla Manguzvane","doi":"10.1016/j.econmod.2024.106921","DOIUrl":"10.1016/j.econmod.2024.106921","url":null,"abstract":"<div><div>This study examines the spillover effects of sovereign risk on international stock markets using a dynamic spatial Durbin model (SDM) on a panel of forty countries from 2009Q1 to 2024Q2. The findings show that an increase in sovereign risk, as measured by CDS spreads, leads to a significant decrease in both local and foreign stock prices, with 0.027 percent reductions across foreign markets on average. These effects are transmitted through geographical, and economic and financial channels, with exchange rates, gross fixed capital formation, and industrial production playing crucial roles in influencing stock market performance. Additionally, the negative (positive) spillover effects from rising gross fixed capital formation and sovereign risk (industrial production) demonstrate how foreign markets are more impacted than domestic ones. The study highlights the interconnected nature of global financial markets, reinforcing the need for coordinated international policy responses to mitigate the transmission of sovereign risk across borders. These findings provide new insights into how global economic factors influence stock market volatility, particularly through specific transmission channels, underscoring the importance of multilateral collaboration in managing sovereign risk.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"141 ","pages":"Article 106921"},"PeriodicalIF":4.2,"publicationDate":"2024-10-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142531595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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