Systemic Risk Transmission from the United States to Asian Economies During the COVID-19 Period

The study investigates the systemic risk transmission from the US banking sector and the US market to the five most economically impacted Asian nations (Thailand, Malaysia, the Philippines, India, and Singapore) during the COVID-19 period of 2020. We consider the conditional value-at-risk (CoVaR) approach to estimate the systemic risk of the given economies at 5% quantile (for severe downturn risk) and 20% quantile (for moderate downturn risk). Our findings demonstrate a rise in systemic risk for these Asian countries in 2020, particularly in the first half of the year. The findings also provide evidence of the significant systemic risk transmission from the US banking sector and the US stock market to the majority of the given Asian economies at both quantiles. The study further highlights the significant contribution of the US financial market in increasing the systemic risk of the given Asian economies in 2020. We find similar results for systemic risk transmission from the UK, the European Union, and Japan to the given Asian economies. The findings have implications for market participants, risk managers, and regulators who are concerned with risk diversification and tracking the routes of risk shock transmission. JEL Codes: G10;G18;G20. © 2023 Institute of Financial Management and Research.

Energy security: Does systemic risk spillover matter? Evidence from China

Considering the severity and frequency of energy risk event shocks, this paper examines whether energy security issue is related to the propagation of significant shocks within the energy system. Relevant researches fail to concern the impact of systemic risk spillovers across energy firms on energy security and its influence mechanisms. By employing a complex network for characterizing risk event shock propagation mechanisms among high-dimensional data, our study captures the transmission of systemic risk among 128 Chinese energy firms from January 2013 to June 2021. Furthermore, using a modified spatial panel model, we find that systemic risk spillovers significantly affect energy security, and the effects are particularly salient in 2015–2016 and under COVID-19. The diffusion of risk event shocks in the Chinese energy system causes a decline in energy production and energy investment, further influencing short- and long-term energy security, respectively. Compared to the energy investment channel during 2015–2016 volatile periods, the negative effect of the COVID-19 crisis on security issues relies more on the energy production channel. The results also show a heterogeneous effect of individual energy firms' risk event shocks on energy security, and the influence of the systemic risk spillovers caused by state-owned firms' risk events is more significant than private firms. Overall, in dealing with frequent energy shocks, collaborations among energy firms, energy sectors, and the government are important for ensuring a country's energy security.

Systemic spillover dynamics of crude oil with Indian Financial indicators in post WPI revision and COVID era

The study first investigates the sensitivity of major Indian financial indicators, viz. Equity Index (Nifty), Exchange Rate (USDINR), Bond (Govt 10Y Bond), Gold, Agricultural Index (N-Krishi) to ascertain the existence of significant sensitivity to standard shocks Engle and Campos-Martins (2020) either arising due to global political/economic factor or endogenous macroeconomic scenario. After that, the study undertakes the systemic spillover dynamics of Crude by estimating a self-exciting regime-switching Threshold Vector Auto-regression model based on cut-off values of Crude to test shock transmission from Crude amid major global events empirically. The findings indicate the existence of three regimes with threshold cut-offs for Crude return, viz. −2.358% and 2.294% for 2008 and 2020, respectively. After that Spillover Index is estimated across the three regimes. The findings indicate a sporadic increase in spillover during the Covid era, GFC and Oil Crisis. Despite Govt. Bond ranking high insensitivity, the spillover linkage is low. The results also indicate that, on average, systemic volatility shocks from crude oil are highest in Gold. In fact, Gold's sensitivity to crude price fluctuations escalates to new heights during the 2008–09 crisis, thus serving as a source of idiosyncratic shocks. Moreover, in recent duration, a unique see-saw kind of link has emerged between crude oil and Gold, where downward pressure by Crude on USDINR is eased by a fall in gold imports. Moreover, an analysis of the spillover pattern across the Wholesale Price Index (WPI) 2012 shows an intensification of spillover from Crude. The study is beneficial to policymakers to apply a systemic approach while empirically analyzing the spillover from a Global commodity such as Crude.