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Financial Spillovers Across Countries: Measuring shock transmissions

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  • Urbina, Jilber

Abstract

We measure volatility spread among countries and summarize it into a volatility spillover index to provide a measurement of such interdependence. Our spillover index is based on the forecast error variance decomposition (FEVD) for a VAR model at h-step ahead forecast, and we construct it using both the orthogonalized FEVD and the generalized FEVD (GFEVD); both of them provide similar results, but the generalized version is easier to handle when a data set with more than 6 variables is involved and non theory in available to impose the restrictions needed by the orthogonal version; this is true since the GFEVD does not depend on the restrictions imposed by the Choleski decomposition. This fact makes it attractive when economic theory does not fit well with variables relationship. An R package for reproducing this chapter estimations is entirely developed.

Suggested Citation

  • Urbina, Jilber, 2013. "Financial Spillovers Across Countries: Measuring shock transmissions," MPRA Paper 75756, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:75756
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    References listed on IDEAS

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    Cited by:

    1. Tihana Škrinjarić, 2019. "Time Varying Spillovers between the Online Search Volume and Stock Returns: Case of CESEE Markets," IJFS, MDPI, vol. 7(4), pages 1-30, October.
    2. Bigerna, Simona & Bollino, Carlo Andrea & Polinori, Paolo, 2021. "Oil import portfolio risk and spillover volatility," Resources Policy, Elsevier, vol. 70(C).
    3. Sanjay Kumar Rout, 2020. "Spillover of Financial Innovations during Covid-19: A Cross-Country Analysis," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(4), pages 298-318, December.
    4. Tihana Škrinjarić & Zrinka Orlović, 2020. "Economic Policy Uncertainty and Stock Market Spillovers: Case of Selected CEE Markets," Mathematics, MDPI, vol. 8(7), pages 1-33, July.
    5. Sanjay Kumar Rout & Hrushikesh Mallick, 2020. "Transmission of International Financial Shocks: A Cross Country Analysis," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(4), pages 236-259, December.
    6. Tihana ŠKRINJARIĆ & Lidija DEDI & Boško ŠEGO, 2021. "Return and Volatility Spillover between Stock Prices and Exchange Rates in Croatia: A Spillover Methodology Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 93-108, December.
    7. Tihana Škrinjarić, 2019. "Examining the Causal Relationship between Tourism and Economic Growth: Spillover Index Approach for Selected CEE and SEE Countries," Economies, MDPI, vol. 7(1), pages 1-19, March.

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    More about this item

    Keywords

    Spillovers; Financial Crisis; Vector Autoregression; Volatility.;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F3 - International Economics - - International Finance
    • F30 - International Economics - - International Finance - - - General
    • G1 - Financial Economics - - General Financial Markets

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