2022 Fiscal Year Annual Research Report
Risk spillover from international financial markets and macroeconomic activities
| Project/Area Number |
19K13738
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| Research Institution | Okayama University |
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Principal Investigator |
蔡 暁静 岡山大学, 社会文化科学学域, 准教授 (90822908)
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| Project Period (FY) |
2019-04-01 – 2023-03-31
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| Keywords | MIDAS / CoVaR / Wavelet Analysis / Quantile regression |
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| Outline of Annual Research Achievements |
This study focuses on the relationship between risk spillover from the global financial market and China’s macro-economy. We develop a novel MIDAS-CoVaR-QR approach to measure the predictability of the effect of risk spillover on the Chinese domestic economy. We provide evidence that risk spillovers from the global financial markets can affect and forecast economic shocks in China, and risk spillovers can cause negative domestic macroeconomic shocks. Specifically, risk spillovers from the global financial market can forecast inflation-related shocks at the extreme condition of the 5th percentile. Further, this predictive ability increases as the time scales increase, as risk spillovers have a strong ability to predict both inflation and output shocks during the 4- and 32-month scales. Our estimation results support that the downside (lower-tail) risk spillover is a better predictor than the central tendency in forecasting negative shocks to the real economy.
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