Regional Financial Spillovers across Europe: A Global VAR Analysis

By Silvia Sgherri, A. Galesi. Social Science Research Network, 2009

133 citations recorded by the source corpus.

The recent financial crisis raises important issues about the transmission of financial shocks across borders. In this paper, a global vector autoregressive (GVAR) model is constructed to assess the relevance of international spillovers following a historical slowdown in U.S. equity prices. The GVAR model contains 27 country-specific models, including the United States, 17 European advanced economies, and 9 European emerging economies. Each country model is linked to the others by a set of country-specific foreign variables, computed using bilateral bank lending exposures. Results reveal considerable comovements of equity prices across mature financial markets. However, the effects on credit growth are found to be country-specific. Evidence indicates that asset prices are the main channel through which - in the short run - financial shocks are transmitted internationally, while the contribution of other variables - like the cost and quantity of credit - becomes more important over longer horizons.

Subfields: Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/0e1aa8e285330ee53b3e2e89ce4e12d6aff4933e

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In Political Science and International Relations

1. Alesia Kalbaska
2. M. Gątkowski

Citations in the corpus

• Eurozone sovereign contagion: Evidence from the CDS market (2005–2010) (2012, methodology): “The analysis of VAR and Granger-causality to assess financial spillovers was applied by Galesi and Sgherri (2009), Gray (2009), Khalid and Kawai (2003) and Sander and Kleimeier (2003).”