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International tail risk connectedness: Network and determinants

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  • Nguyen, Linh Hoang
  • Lambe, Brendan John

Abstract

We construct a complete network of directional tail risk connectedness for 32 countries within a Least Absolute Shrinkage and Selection Operator (LASSO) Quantile Regression framework. In addition to highlighting the network’s essential features, including the key drivers and receivers of tail risk, we reveal some striking new network determinants. These include the predominant role of economy size, as well as the negative net impact of economic linkages such as trade and capital flows in addition to capital stocks on cross-country tail risk connectedness.

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  • Nguyen, Linh Hoang & Lambe, Brendan John, 2021. "International tail risk connectedness: Network and determinants," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:intfin:v:72:y:2021:i:c:s1042443121000512
    DOI: 10.1016/j.intfin.2021.101332
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    More about this item

    Keywords

    Tail risk spillover; Contagion; International financial market; Economic linkage; Quantile regression;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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