The Impact of US Uncertainty Shocks on Small Open Economies

In this paper, we investigate the impact of US uncertainty shocks on GDP growth in nine small open economies: Australia, Canada, Denmark, Finland, Iceland, New Zealand, Norway, Sweden and the United Kingdom. We compare the impact of two types of shocks: i) stock market volatility shocks and ii) policy uncertainty shocks. Using quarterly data from 1986Q1 to 2016Q1, this issue is analysed using Bayesian VAR models. Our results suggest that policy uncertainty seems to matter more than stock market volatility. Stock market volatility shocks appear to robustly have significant effects on Danish GDP growth. Policy uncertainty shocks, on the other hand, reliably lowers GDP growth in all five Nordic countries in a statistically significant manner. Statistically significant effects of policy uncertainty shocks on the Anglo-Saxon countries in our sample are harder to establish and are, in our preferred specification, only found for the United Kingdom.     

Global commodity prices and global stock market volatility shocks: Effects across countries

We investigate the time-varying dynamics of global stock market volatility, commodity prices, domestic output and consumer prices. We find (i) stock market volatility and commodity price shocks impact each other and the economy in a gradual and endogenous adjustment process, (ii) impact of commodity price shock on global stock market volatility is significant during global financial crises, (iii) effects of global stock market volatility on the US output are amplified by endogenous commodity price responses, (iv) effects of global stock market volatility shocks on the economy are heterogeneous across nations and relatively larger in twelve developed countries, (v) four developing/small economies are more vulnerable to commodity price shocks.     

内外部冲击下中国股市网络的动态演化和 稳健性分析

股市的平稳运行是实现金融发展、金融稳定和金融安全的重要一环。文章基于复杂网络理论,以2015年股灾和2018年中美贸易战为背景,分别构建不同时期中国股市的MST网络,探索在不同类型冲击下我国股市网络的结构特征,将最小生成树方法和滑动分析相结合,研究我国股市网络动态演化的时变特征和稳健性。结果表明,不同时期股市网络MST结构变化较大;不同时期网络节点的度分布均服从幂律分布,且中心性节点在冲击发生前,集中出现在工业领域,而冲击中、后期则更多地出现在金融领域;股市网络连通性和稳健性会因为冲击类型不同而出现差别,内部冲击(2015年股灾)会降低同行业连接边数,而外部冲击(中美贸易战)则会增加同行业连接边数,且前者比后者对股市网络结构的影响更大,市场对于内部冲击的抵御能力更弱;虽然内外部冲击短期内对网络连接的稳健性冲击不大,但从长期看,网络连接的存活率会急剧下降,网络结构稳健性随时间变化而减弱。     

Deflation,Productivity Shocks and Gold: Evidence from the 1880–1914 Period

In this paper we examine the sources and impact of deflation on the growth experiences of the four dominant countries on the gold standard in the period 1880–1913: the United States, The United Kingdom, France and Germany. We distinguish between good deflation, (driven by positive aggregate supply shocks) and bad deflation (driven by aggregate demand shocks). We use an empirical Blanchard/Quah model which decomposes the behaviour of prices, output and the money stock into the impact of shocks such as a world price level shock, a domestic supply shock, and domestic demand shocks including a shock to the domestic gold stock. Our key finding is that the European economies were essentially classic in the sense that output was mainly supply driven and that money was neutral even when country specific gold stocks are included. In the United States, however, we observe both good and bad deflation.     

Permanent and Temporary Components of Stock Prices: Evidence from Assessing Macroeconomic Shocks

This paper outlines a simple macro model with overlapping wage contracts to investigate how the temporary and permanent components of stock price movements may be related to aggregate macro-economic supply and demand disturbances. In the content of the model, we show that aggregate demand shocks have only temporary effects on real stock prices, while supply shocks may affect the level of real stock prices permanently. Moreover, the temporary component in U.S. stock prices, identified by placing appropriate structural restrictions on a vector autoregressive system estimated for the postwar period, is statistically significant. This evidence supports the mean-reversion hypothesis that stock prices are not pure random walks. The finding is robust to the choice of variables used in the vector autoregressive system and periodicity.     

The co-movement of stock markets in East Asia: Did the 1997–1998 Asian financial crisis really strengthen stock market integration?

This paper examines the integration and causality of interdependencies among seven major East Asian stock exchanges before, during, and after the 1997–1998 Asian financial crisis. For this purpose, we use daily stock market data from July 1, 1992 to June 30, 2003 in local currency as well as US dollar terms. The data reveal that the relationships among East Asian stock markets are time varying. While stock market interactions are limited before the Asian financial crisis, we find that Hong Kong and Singapore respond significantly to shocks in most other East Asian markets, including Shanghai and Shenzhen, during this crisis. After the crisis, shocks in Hong Kong and Singapore largely affect other East Asian stock markets, except for those in Mainland China. Finally, considering the role of the USA shows that it strongly influences stock returns in East Asia – except for Mainland China – in all periods, while the reverse does not hold true.     

信息、政策冲击和中国股票、债券及外汇市场一体化——基于AG-DCC模型的金融市场动态相关性分析

本文运用Cappiello et al．（2006）提出的AG—DCC模型对中国金融市场的研究发现,中国股票、债券和外汇市场间存在明显的动态相关性 ,虽然“正向冲击”和“负向冲击”对金融市场波动并不产生明显的非对称效应,但对市场间动态相关性有着显著的影响,而且信息和政策冲击反映在动态相关性的结构变化上。最后,用平均动态相关性作为一体化指标对中国金融市场的考察发现,相对于欧盟市场间,中国股票市场一体化程度相当高,但股票和债券、股票和外汇以及债券和外汇市场间的一体化程度有待提高。     

收益波动与随机冲击的非对称性影响：中国与美国股票市场的对比

通过讨论股票收益与随机;中击之间的关系,对中国股票市场和美国股票市场进行了对比研究。研究中使用了中国上海和深圳股票市场1990年12月31日至2005年12月30日的两市A股算术平均周指,以及美国股票市场1973年1月2日至2004年月12月30日的标准普尔500周指。在进行经验研究的过程中,分别使用了线性GARCH模型和GJR—GARCH模型计量股票收益的条件波动——即模型中的条件方差。研究发现,中国股票市场自1990年——1995年波动剧烈,之后波动趋于平缓,而美国股票市场在研究期间内收益波动一直处于一定范围内。同时还发现,美国股票市场的随机冲击对股票收益产生非对称性影响,即负冲击使股票收益产生的波动大于正冲击。而在中国股票市场却找不到相似的证据。鉴于对中国股票市场收益波动的研究结果,在剔除1996年以前的数据之后又进行了扩展研究,但是似然比率检验结果表明,正冲击对股票收益的影响还要略强于负冲击。     

Equity Risk Premium Puzzle: Evidence from Indonesia and Sri Lanka

This paper investigates the equity risk premium puzzle in the Indonesian and Sri Lankan stock markets in order to identify the relationship between the volatility of excess returns and the equity risk premium. The asymmetric impact of negative shocks on the equity risk premium is also examined using threshold and exponential GARCH-M models. We analyse data on the excess returns of the Indonesian and Sri Lankan stock markets from 2004 to 2013, and we find that the impact of the conditional volatility of excess returns on the equity risk premium is not significant in either country. Instead, we find an impact from negative return shocks on the equity risk premium only in Sri Lanka. Therefore, we conclude that investors are not compensated for the conditional volatility of the excess returns in these two markets, while Sri Lankan investors are compensated for the risk of negative shocks.     

Monetary policy and real estate prices: a disaggregated analysis for Switzerland

Most empirical studies found that monetary policy has a significant effect on house prices while stock markets remain unaffected by interest rate shocks. In this paper we conduct a more detailed analysis by studying various sub-segments of the real estate market. Employing a new dataset for Switzerland we estimate vector autoregressive models and find positive interest rate shocks to have adverse effects on house and condominium prices on the one hand and rental prices on the other. Commercial property prices as stock markets do not react on interest rate variations.     

SYNCHRONISATION BETWEEN SOUTH AFRICA AND THE U.S.: A STRUCTURAL DYNAMIC FACTOR ANALYSIS

This paper studies the synchronisation of the South African and the US cycles and transmission channels through which supply and demand shocks from the US affect economic activity in South Africa in a structural dynamic factor model framework. We find, using the full-sample period, US supply shocks are transmitted to South Africa through business confidence and imports of goods and services; while US demand shocks are transmitted via interest rates, stock prices, exports of goods and services, and real effective exchange rates. Second, there is a decrease in integration over time translated by a drop in synchronisation of cycles. The impact of an increase in comovement of GDP is outweighed by the structural reforms initiated by the government after the end of apartheid. Finally, the idiosyncratic component still plays an important role in the South African economy.     

The effectiveness of monetary policy in China: Evidence from a Qual VAR

Analyzing monetary policy in China is not straightforward because the People's Bank of China (PBoC) implements policy by using more than one instrument. In this paper we use a Qual VAR, a conventional VAR system augmented with binary policy announcements, to extract a latent indicator of tightening and easing pressure, respectively, for China. The model acknowledges that policy announcements are endogenous and summarizes policy by a single indicator. The Qual VAR allows us to study the impact of monetary policy in terms of unexpected changes in these latent variables, which we identify using sign restrictions. We show that the transmission of monetary policy impulses to the rest of the economy is similar to the transmission process in advanced economies in terms of both output growth and inflation despite a very different monetary policy framework. We find that bank loans are not sensitive to policy changes, which implies that window guidance is still a necessary policy tool. We also find that the impact of monetary policy shocks is asymmetric in terms of asset prices, that is, the asset price reactions differ in their sensitivity to tightening shocks and easing shocks, respectively. In particular, an easing of monetary conditions boosts stock prices while a tightening shock leaves stock prices unaffected. This shows that monetary policy is not a suitable tool to stabilize asset prices, which raises implications for financial stability and macroprudential policy.     

Stock Market's Response to Real Output Shocks in China: A VARwAL Estimation

This paper studies the connection between the stock market and real output in China and compares it with benchmark countries, employing a novel vector autoregression with asymmetric leads (VARwAL) model. It makes two contributions. First, it finds that the time profile of the Chinese stock market's response to real output shocks suggests no evidence of a distorted relationship due to manipulation of Chinese real output data or domination of the Chinese stock market by individual investors. Rather, the Chinese stock market is relatively more responsive to real output, in line with the larger share of manufacturing in the Chinese economy. Electricity output and industrial profits, two different, less-manipulable time series, yield similar results. Second, it presents the first use of VARwAL impulse responses to detect stock market bubbles: VARwAL captures the 2015 bubble in China successfully. Over the full sample period, China's stock market appears to have been less prone to bubbles than the US stock market.     

Examining Stock Volatility in the Segmented Chinese Stock Markets: A SWARCH Approach

Abstract

This study adopts the SWARCH model to examine the volatile behavior and volatility linkages among the four major segmented Chinese stock indices. We find strong evidence of a regime shift in the volatility of the four markets, and the SWARCH model appears to outperform standard generalized autoregressive conditional heteroskedasticity (GARCH) family models. The evidence suggests that, compared with the A-share markets, B-share markets stay in a high-volatility state longer and are more volatile and shift more frequently between high- and low-volatility states. In addition, the relative magnitude of the high-volatility compared with that of the low-volatility state in the B-share markets is much greater than the case in the two A-share markets. B-share markets are found to be more sensitive to international shocks, while A-share markets seem immune to international spillovers of volatility. Finally, analyses of the volatility spillover effect among the four stock markets indicate that the A-share markets play a dominant role in volatility in Chinese stock markets.     

Influence of oil prices on stock market indexes in Russia and Norway

The effects of oil price dynamics on share quotations are discussed in the paper for the 2000–2012 period for two oil exporting countries—Russia and Norway. It has been shown, using a vector autoregressive model, that, in spite of intuitive expectations, oil prices have not been a systematic risk factor for Russian and Norwegian stock market indices. In Norway, share quotations definitely responded to the dynamics of the US dollar exchange rate relative to the world’s main currencies and the S&P 500 stock index, as well as to fluctuations in the global and domestic interest rates, although to a lesser degree. In Russia, share quotations are practically exclusively affected by their own shocks (a factor that is explained by some specific features characterizing Russia’s major public companies).     

Multivariate GARCH Volatility Across Major Industry Groups of the Stock Exchange of Thailand

This paper examines the volatility on the time-series relations among the returns of industry group indices in the stock exchange of Thailand. Does volatility of the return series in one industry group indices necessarily lead to volatility in other industry group indices among the sample of eight industry groups？ This research will be valuable to investors utilizing a better understand diversification needed to get good returns. Daily data （2,116 days） are used in this paper covering data for the nine-year period from January 5, 2004, to August 31, 2012. Multivariate Generalized Autoregressive Conditional Heteroscedasticity was tested consisted of： （1） Diagonal VEC Model; （2） Baba Engle Kraft Kroner Models （BEKK Models）; （3） Vector Autoregressive Moving Average GARCH Model （VARMA GARCH Model）; and （4） Constant Conditional Correlation Model （CCC Model）. The findings indicated that the major result shows that, volatility in one industry group necessarily lead to volatility in other industry group indices in the opposite way and in the similar way.     

Livestock as a buffer against HIV and AIDS income shocks in the rural households of Zimbabwe

The objective of this study was to determine the extent to which households use livestock sales to mitigate the impact of HIV/AIDS income shocks. Using survey data from the Muzarabani and Bindura districts of Mashonaland Central Province in Zimbabwe, the econometric analysis indicated that livestock, particularly poultry and small stock, play a significant role in smoothing income fluctuations due to HIV/AIDS. Cattle sales compensate for 71 per cent of income shortfalls due to HIV/AIDS. About 90 per cent of HIV/AIDS-afflicted households, headed mainly by women or children, used poultry and goats as consumption-smoothing strategies when faced with negative income shocks. Government and other stakeholders were advised to support the use of small stock as a strategy for coping with HIV/AIDS economic shock in female- or child-headed households in rural areas.     

Does International Diversification Really Diversify Risks?

This paper demonstrates that large adverse shocks are more highly correlated with one another than positive shocks across national stock markets of industrialized economies. This finding is robust if we allow for an ARCH process or if we exclude the data of October 1987. It is shown that the negative skewness of the world market portfolio is primarily responsible for such time-varying correlations of national stock markets. We propose to model the world market portfolio return by using the extended QGARCH model of J. Y. Campbell and L. Hentschel (1992, J. Finan. Econ.31, 281–318). The finding suggests that the U.S. investors' benefit from international portfolio diversification could be far more limited than is commonly thought. J. Japan. Int. Econ., March 2002, 16(1) pp. 109–134. Institute of Economic Research, Hitotsubashi University, Kunitachi-city, Tokyo 186–8603, Japan; and Institute of Policy and Planning Sciences, University of Tsukuba, Tsukuba, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: F30, G11, G15.     

Testing contagion of the 1997–98 crisis in Asian stock markets with structural breaks and incubation periods

This study tests for the existence of financial contagion, using a method that allows an incubation period before contagion takes effect. We define contagion as an increase in cross-market linkages following shocks. With daily data on Asian stock markets during the 1997–98 crisis, we find significant upward shifts in the linkages between the Asian markets of both crisis and non-crisis countries. The upward shifts are maintained even after controlling for heteroskedasticity and common world and regional factors, providing strong evidence for financial contagion.