Research On International Contagion Effects Of Financial Risk Based On The Perspective Of Financial Market Linkage

Since the middle of last year,Europe has experienced the UK out of Europe,Italy referendum and other major political and economic events,which caused the global financial market turmoil.This year,the new President of the United States"anti-globalization" political and economic position further exacerbated the market panic and exacerbated the instability in global financial markets."Black swan" events also makes the international financial risk contagion effects presents some new features,such as normalization and short-termism.However,the financial risk management capability of international contagion effect of the vast majority of countries is still below the average,especially for emerging market countries.In China,for example,on the one hand,the early warning consciousness and ability of government for cross-border contagion risk is relatively lack,on the other hand,the disposal of the international financial risk contagion is given priority to with qualitative means.In view of this,this article will evaluate the international financial risk contagion effects and explore its influencing factors,and hope to be able to strengthen management capability of China.The purpose of this study is to reasonable assessment of the international financial risk contagion effect of network structure,to clarify the direction and intensity of contagion effects,and to explore the influencing factors of contagion effects.Its research target is mainly manifested in the following four aspects.First,based on minimum spanning tree model and Vine-Copula-TARCH model,this paper builds a reasonable network structure of international financial risk contagion effects.Second,by time-varying Copula connect CoVaR method to judge the direction and intensity of the contagion effects,and based on the EMD method to explore the differences of different frequency contagion effects.Third,starting from the theory of the status quo,and using dynamic panel data and the generalized moment estimation method,this paper explores the influencing factors of different types of contagion effects and conducts the contrast analysis.Fourth,from the empirical conclusions,this paper proposes general management advice to deal with the international contagion effect,and puts forward the concrete measures for China.First of all,the international financial risk contagion effect has always shown five common features in recent years,but it has also begun to show the weakening ofinternational trade channel,the enhancement of financial channel and investor behavior channel,as well as the short-term and rapid characteristics of contagion effect.Secondly,the network structure of international financial risk contagion effects have some significant nodes with systemati3c importance,but even the most important markets in these nodes are difficult to have a significant impact on the global market.To be specific,systemically important node of the stock market is the United States,Hong Kong and France,systemically important node of the foreign exchange market is Japan,and systemically important node of the interest rates market is Hong Kong and South Korea.Among them,the United States,Japan and Hong Kong are the most important ones.But in addition to the foreign exchange market,the other two market does not exist a countries or region with monopoly power to the global market.Thirdly,the most important nodes of each market are the net output points of financial risk for the whole network,and these nodes have almost the same capability of risk output to other countries,but the contagion effects of different markets and frequencies are vitally different,as the main driving frequencies of different periods.For contagion effects in different kinds of markets,there are maximum intensity for once shock in the effects of stock markets,there are maximum volatility in the effects of interest rate markets,while there are both minimum intensity for once shock and maximum stability in the effects of foreign exchange markets.For contagion effects under different frequencies,the overall direction of most important nodes under the high frequency contagion effects is not clear and it has short duration,while its occured most frequently and has the maximum intensity;the low frequency contagion effect has a clear direction and long duration,while it is hard to occur and has the middle intensity;the middle frequency contagion effect has the minimum intensity,and other features are between the high and low frequency contagion effect.For main driving frequencies of effects in different periods,high and medium frequency contagion effect play leading roles in times of non-crisis,while the effect of high and low frequency has significant impact on the overall effect in times of crisis.Fourthly,fundamental factors and investor behavior are the main influencing factors of international financial risk contagion effect,but there are still differences in the influencing factors of different frequency effects and different types of market.The basic factors and the channels of investor behavior are the most important.Overall contagion effect is affected by the basic factors and all kinds of channels.High frequency contagion effect is usually affected by the contagion effects of the previous period and the channels of investor behavior.Middle frequency contagion effect is usually affected by the basic factors and channels of investor behavior.Low frequency contagion effect is usually affected by the basic variables and international trade channels.Additionally,stock markets are mainly affected by financial relationship and investor behaviors,while interest rates markets are the opposite.Finally,establishing a long-term mechanism of macro management to deal with contagion effect,optimizing the management concept for contagion effect,strengthening the international cooperation with financial regulators around the world and choosing a reasonable model are helpful for improving management capability for contagion effects.This paper presents some universal suggestions and quantitative standards to make management of contagion effects more efficient and specific measures for implementation in China.