ABSTRACT
To improve financial sustainability and promote economic stability, it is important to understand the intricate relationship between finance and macroeconomy. Thus, focusing on financial stress and macroeconomic sectors, this paper investigates macro-financial spillovers in China. First, we develop a high-frequency financial stress index based on eight daily financial indicators to measure the stability of China’s financial markets. Through event identification, we find that China’s Financial Stress Index can effectively reflect the stress situation of China’s financial market. Then, given that the traditional co-frequency method fails to deal with financial stress index and macroeconomic data with different frequencies, we employ the mixed-frequency spillover method to evaluate macro-financial spillovers to examine the connectedness between China’s financial market and the real side of the economy. We find that financial stress is the leading net risk output and primarily affects the loan sector;deterioration of economic conditions can lead to more apparent fluctuations in spillover effects, with spillovers from financial stress to others being the most susceptible;within the sample, the 2015 stock crash, U.S.–China trade friction, and COVID-19 have the most impact on macro-financial spillover effects. In addition, we track the results of different risk events on spillover effects across sectors.