Through the looking glass: Unveiling geopolitical risks and sovereign bond spillovers in the eurozone

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE

International Review of Financial Analysis Pub Date : 2025-03-26 DOI:10.1016/j.irfa.2025.104190

Yong Jiang , Tony Klein , Yi-Shuai Ren , Jia-Hang Dai

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Abstract

This study introduces a novel time-varying parameter vector autoregressive (TVP-VAR) frequency connectedness approach for measuring the frequency transmission mechanism and dynamic spillovers among the sovereign bond markets of 13 Eurozone countries. Furthermore, the impact of global geopolitical risk (GPR) on the spillovers is examined through a time-varying Granger causality test. The results reveal strong spillovers in the Eurozone over time, especially since the spillover is predominantly driven by the short-term frequency domain. Besides, an asymmetry exists in the spillover effects between positive and negative returns, with spillovers being more pronounced for positive ones. The predictivity of geopolitical threats (GPRT) and geopolitical acts (GPRA) show significant time heterogeneity, particularly in response to specific extreme geopolitical risk events. Additionally, GPR, GPRT, and GPRA can significantly predict the spillovers for aggregate market return, specifically for positive ones, but it does not hold for negative returns (except for a temporary predictive capacity during COVID-19 of 2020). Finally, the Russia-Ukraine conflict predominantly influences sovereign bond market return spillovers through GPRT.

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透过镜子：揭示欧元区地缘政治风险和主权债券溢出效应

本文提出了一种新的时变参数向量自回归（TVP-VAR）频率连通性方法，用于测量欧元区13国主权债券市场之间的频率传递机制和动态溢出效应。此外，本文还通过时变格兰杰因果检验检验了全球地缘政治风险对溢出效应的影响。研究结果显示，随着时间的推移，欧元区的溢出效应很强，特别是因为溢出效应主要由短期频域驱动。此外，正收益与负收益的溢出效应存在不对称性，正收益的溢出效应更为明显。地缘政治威胁（GPRT）和地缘政治行为（GPRA）的预测表现出显著的时间异质性，特别是在应对特定的极端地缘政治风险事件时。此外，GPR、GPRT和GPRA可以显著预测市场总收益的溢出效应，特别是正收益的溢出效应，但对负收益的溢出效应不成立（除了2020年COVID-19期间的临时预测能力）。最后，俄乌冲突主要通过GPRT影响主权债券市场回报溢出效应。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.