The Dynamic Relationship Of Risk Spillovers Among Industries Based On Long-run Variance Decomposition Network In China

Since the crisis,China's economy has been affected by complex and changing internal and external factors such as shifts in economic growth speed,the adjustment of the economic structure,the change of leverage policies,and the trade disputes between China and the United States.This will not only more or less affect the development of each industry in China,but also have an impact on the links between industries,and then make the risk spillover of the industry has changed dynamically,thus increasing the difficulty of preventing systemic risk in China.Therefore,on the basis of studying the systemic importance and vulnerability of each industry in each stage,it is of great significance to identify the most systemically important and vulnerable industries in each stage to prevent systemic risks.Moreover,Interconnectedness between share price and firms plays a crucial role in the volatility contagion phenomena that characterise financial crises.Based on existing research,this paper combines the generalized dynamic factor model and the sparse VAR model,and uses the random component data of the volatility of the CSI 300 stocks to build the long-run variance decomposition network at each stage,analyzes the risk spillover relationship of various industries in China's development process.and draws the following conclusions:(1)Although the industries with the most systemic importance(systemic crisis in various industries caused by its own large fluctuations)and system fragility(impact on these industries at the time of the crisis)will be slightly different at each stage,the transportation,warehousing,and postal industries at each stage can have high systemic importance,and the health and society work industry,transportation,warehousing,and postal industries have high system fragility at each stage.(2)In terms of the current stage(stage 5),China should not only strengthen the supervision of the transportation,warehousing and postal industries,the health and social work industries,but also strengthen the supervision of information transmission,software and information technology service industries,and the financial industries.So that we can prevent systemic crises in each sector caused by their own large fluctuations.In addition,China should also focus on protecting and supervising electricity,heat,gas and water production and supply industries,so as to reduce the impact on these industries when a crisis occurs.(3)In order to better prevent systemic risks,we should not only pay more attention to the correlation effect of network,but also pay attention to the upstream and downstream industries based on the analysis of systemically important industries and vulnerable industries.At the same time,China should focus on counter-cyclical management strategies in systemic risk management,and should not blindly expand operations when the economy is booming or when a certain industry suffers a positive impact.