2017 Fiscal Year Research-status Report
Systemic risk in financial markets
| Project/Area Number |
17K13759
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| Research Institution | Tohoku University |
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Principal Investigator |
chuang hongwei 東北大学, 経済学研究科, 准教授 (70732551)
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| Project Period (FY) |
2017-04-01 – 2021-03-31
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| Keywords | systemic risk / financial network / CPIS |
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| Outline of Annual Research Achievements |
I have been supported by JSPS KAKENHI [17K13759 JP] to study some issues of systemic risk in financial markets. Recently, a few research results were accepted to publish in an international journal, Applied Economics Letters, in the year of 2018. This study mainly answers the following questions: (1) What is the geography of international financial flows?; (2) How do international financial flows behave?; and (3) Do international financial flows affect stock markets?, from the perspective of network analysis. Although the advantages of international diversification of equity portfolios and the continuing existence of a strong domestic bias of investors in international equity investment, these fundamental questions about international financial flows are less being discussed. Relying on the IMF Coordinated Portfolio Investment Survey, which reports countries' bilateral investments in financial assets at end-2001 to end-2015, I show that a country’s stock market growth is not only spatially correlated with those of nearby countries, but also positively associated with the magnitude of connectedness of the country’s international investments in debt within a dynamic financial investment flow network. The positive relation arises because debts have become an increasingly important source of capital for developing countries.
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| Current Status of Research Progress |
Current Status of Research Progress
2: Research has progressed on the whole more than it was originally planned.
Reason
Nowadays, with technology innovation in the finance industry, different types of information sources and various real-time and unstructured data like the business and financial news, industry data, trading data, regulatory data, analyst forecast reports, and social media data have been raised in our society. These data sets are mostly unstructured and distributed everywhere. Managing these data requires to digitalize, reorganize, and tag. Importantly, analyzing these data sets in attracting useful information to have an impact on our society becomes a challenging work. Therefore, studying the threat of systemic failures in a financial system spilling over into real economy based on these data sets is not easy.
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| Strategy for Future Research Activity |
Systemic risk is one of the greatest risks facing by Japan since its financial dependence in the global economy. The 2008 subprime crisis in the US and 2011 European sovereign debt demonstrated that Japanese policymakers and private sectors were inadequately prepared for such a systemic risk in a financial crisis. Central bankers primarily focus on fighting inflation while efforts to maintain financial stability but neglect the system as a whole. To build up a fundamental study of systemic risk broadly would be my future research plans.
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| Causes of Carryover |
Japan’s financial dependence in the global world puts its economy on the edge of danger. The 2008 subprime crisis in the US and 2011 European sovereign debt have demonstrated that Japanese central bankers primarily focus on fighting inflation while efforts to maintain financial stability but neglect the whole system. Japanese policymakers and private sectors were also inadequately prepared for such a systemic risk in a financial crisis. I have studied the topic of financial networks and published few papers over the past few years. The project is not finished yet, and I would like to continue this project without any interrupting.
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Research Products
(3 results)
