Crisis Transmission Research Articles

Whether academics' job performance makes a difference to burnout and the effect of psychological counselling-comparison of four types of performers.

Treating burnout as an independent variable while performance is the dependent variable, earlier studies revealed that job burnout experienced by academics adversely affects how well they perform. Whether performance may contribute to the emergence of burnout is yet to be analyzed-it is an issue investigated in this paper. Readjusting the nature of the variables, this quantitative study adopted group regression and it discovered that the performance of academics instead regulates their burnout without making performance a consequence of burnout-a new dynamic that challenges the earlier assumption. Following this earlier belief, counselling strategy to boost the employees' psyche was deemed to be the main post-measurement tool to deal with the burnout crisis. With respect to both tenets (current and earlier), psychological counselling was treated as a moderating variable to check whether it is important enough in removing the burnout felt by employees so that they subsequently could function better. It is further discovered that although psychological counselling removes employees' burnout to some extent, it failed to transform them into better-functioning people. This study suggests a pre-measurement counselling strategy will ensure academics are competently engaged since ensuring competency is a fundamental aspect of eliminating a job burnout crisis. The sustained competency of employees will eventually prevent burnout and may halt the transmission of a burnout crisis at large-it adds to this study's theoretical contribution to the topic.

Features of different asset types and extreme risk transmission during the COVID-19 crisis

Unlike the current extensive literature, which discusses which assets can avoid the risks caused by the COVID-19 pandemic, this study examines whether the characteristics of different assets affect the extreme risk transmission of the COVID-19 crisis. This study explores the effects of COVID-19 pandemic–related risk factors (i.e., pandemic severity, pandemic regulations and policies, and vaccination-related variables) on the risk of extreme volatility in asset returns across eight assets. These eight assets belong to the following classes: virtual, financial, energy, commodities, and real assets. To consider the different possible aspects of the COVID-19 impact, this study adopts both empirical methods separately, considering variables related to the pandemic as exogenous shocks and endogenous factors. Using these methods, this study enabled a systematic analysis of the relationship between the features of different asset types and the effects of extreme risk transmission during the COVID-19 crisis. The results show that different types of asset markets are affected by different risk factors. Virtual and commodity assets do not exhibit extreme volatility induced by the COVID-19 pandemic. The energy market, including crude oil, is most affected by the negative impact of the severity of the pandemic, which is unfavorable for investment at the beginning of the pandemic. However, after vaccinations and pandemic regulations controlled the spread of infection, the recovery of the energy market made it more conducive to investment. In addition, this study explains the differences between the hedging characteristics of Bitcoin and gold. The findings of this study can help investors choose asset types systematically when faced with different shocks.

Investigating the dynamics of crisis transmission channels: A comparative analysis

This paper analyzes the growing complexity of cross-market interdependence during financial crises. From macroeconomic, investor constraint, and quantitative easing policy perspectives, we investigate crisis transmission channels across major stock markets by comparing the 2008 global financial crisis, the 2020 COVID-19 crisis, and the 2022 Russo-Ukrainian crisis. We find that lower-tail contagion is mainly driven by the wealth effect and upper-tail contagion is mainly driven by the portfolio rebalancing, and shed light on the underlying dynamic mechanisms, such as credit spreads, risk aversion, economic policy uncertainty, and quantitative easing policy. Additionally, we show the impact of macroeconomic fundamentals, investor sentiment, and quantitative easing policy on lower-tail and upper-tail financial contagion.

Correction: Crisis transmission degree measurement under crisis propagation model

Correction: Crisis transmission degree measurement under crisis propagation model

Interbank Networks and the Interregional Transmission of Financial Crises: Evidence from the Panic of 1907

Interbank Networks and the Interregional Transmission of Financial Crises: Evidence from the Panic of 1907

Финансовые кризисы и финансовое заражение в странах Латинской Америки

The article deals with modern financial crises and features of their spread in Latin America. The classification of crises and ways of their identification are presented. The interconnectedness of modern financial crises is emphasized, which leads to the emergence of double and triple crises. Such crises have been repeatedly recorded in Argentina, Mexico, Uruguay and other countries. Over a period of more than fifty years, Latin America experienced 165 financial crises, with the largest share of them occurring in currency crises. The article proposes the indicator “crisis burden on the countries of Latin America” – its calculation for the period 1970–2019 showed that the region is characterized by alternating growth and decrease in the burden from banking and currency crises with a relatively stable load from debt crises. The maximum intensity of financial crises was observed in the 1970–1980, and then it decreased, although there were isolated spikes. The interconnectedness of crises is analyzed in the context of the effects of financial contagion – the transmission of shocks through different channels from one country or region to another country or region. Two main approaches explaining the mechanisms of transmission of crises between countries have been allocated. The results of studies indicating the direction and extent of financial contagion in Latin America were discussed. In particular, it is shown that contagion in the crisis periods of 1990–2000 spread both within the region and from the United States through trade and financial channels. The article presents the results of its own empirical study, which also confirmed the existence of contagion in this region. For the calculations, daily data on the stock indices of 8 Latin American countries over a long period of time were used. With the help of econometric tests for shifts in correlations (Forbes-Rigobon test and coskewness test), it was found that the recipients of contagion that spread through the stock market channels from the United States during the global financial crisis of 2007–2009 were countries such as Argentina, Brazil, Colombia and Mexico. During the crisis caused by the spread of COVID‑19, only Mexico was susceptible to contagion. This made it possible to draw a conclusion about the resilience of Latin American economies to the pandemic shock and the effectiveness of restrictive government measures.

Crisis transmission degree measurement under crisis propagation model.

The online version contains supplementary material available at 10.1007/s43546-022-00361-9.

금융안정을 위한 선제적 자금지원체계 도입방안에 관한 연구

In the event of an exceptional financial crisis equivalent to system risk, such as the 2008 financial crisis or the 2020 COVID-19 crisis, huge economic costs will be incurred. Therefore, it is necessary to introduce a preemptive and preventive funding system aimed at preventing crisis transmission and preventing insolvency of financial institutions in advance in the event of a financial crisis. In this study, it is derived through comparative studies with international preemptive funding systems that it is necessary to introduce a preemptive funding system, and then a detailed introduction plan of a financial stability account is reviewed and additional considerations are presented.

Crisis transmission channel for 17 East-European countries during the Global Financial Crisis

ABSTRACT This paper investigates if the transmission channel of the Global Financial Crisis to 17 Eastern European markets can be directly connected with the US market or one of the three largest European markets. By employing a dummy regression model with a GJR-GARCH and EGARCH frameworks, the results show that Euronext is the main transmission channel for most analyzed markets. Latvia, Russia and Serbia were affected by the London Stock Exchange, while Slovakia showed no contagion. These results show that the crisis’s effects and transmission were not identical worldwide. This suggests that measures created to mitigate such crises should be tailored to each market.

Risk of Global Economic Crisis in 2022 and the Mechanism of Transmission of Economic Shocks between the Main Areas of the Global Economy

Goal – the aim of the study is to analyze the main economic areas of the global economy in terms of the possibility of transferring the crisis in relation to the current global economic situation. Research methodology – the analysis conducted was based on literature research; the empirical analysis used causation in the Granger sense and Pearson’s linear correlation coefficient. Score/results – The existence of the so–called “locomotive effect” was observed for a group of countries: USA–CSSA, CSSA–USA, EA–LA, EA–CSSA, LA–EA, CSSA–EA, MECA–LA, MECA–CSSA, LA–MECA, CSSA–MECA, EDA–CSSA, CSSA–EDA, LA–CSSA, CSSA–LA, meaning a positive domestic shock transmitted to the economic partner, among the countries studied, the analysis is carried out based on annual data of GDP values as a measure of economic activity. CSSA remains the safest economic area and also the most neutral in view of the current global economic and political situation. In the WPE, there is a maximum [full] correlation of 1 for: EDA–USA, MECA–EA, EDA–EA, MECA–EDA and EDA–MECA. These are currently the most dangerous and crisis–prone areas, with potential for transferring crises between them. It is facilitated by territorial cohesion and the geopolitical situation between countries in these economic regions. Relatively high correlations can also be observed in these areas between the analyzed factors: IMP, IMG, IDCF and PC. The risk of transferring a crisis resulting from war between the areas mentioned is the highest here. Other correlations in terms of: USA–EA, USA–LA, EA–USA, LA–USA, LA–EDA, EDA–LA remain at weak or average levels. This is influenced by geographic distance and the lack of strong economic and political ties. Originality/value – the originality of the study results from the topic undertaken. Identification of potential crisis areas and channels of crisis transmission in the current global geopolitical situation constitutes an added value.

Transmission of the Greek crisis on the sovereign debt markets in the euro area.

We test for the contagion effects stemming from the Greek debt crisis in the daily 10-year sovereign bond yield spreads in nine Economic and Monetary Union (EMU) countries. To this end, we estimate the dynamic conditional correlation (DCC) model of Engle (2002) from January 01, 2003 to December 31, 2015. In addition, we calculate and plot the upper and lower bounds of the confidence interval for each DCC series. To the best of our knowledge, this approach of Kchaou and Bellalah (2020) has never been used to study the contagion of the subprime and Greek crises between the 10-year sovereign bond yield spreads of the main EMU countries. Consequently, this approach enables us to compare our results with those of previous works based on other methods. It also offers useful insights to policy makers to address the contagion effect through the implementation of adequate measures. Although the Greek spread played the role of a global factor for the majority of countries during the observation period, the results invalidate the existence of contagious episodes resulting from the Hellenic crisis. We justify these findings either by the weakness of the weight of the Greek economy in the euro area or by the effectiveness of the unconventional monetary policies taken by the European Central Bank (ECB), the bailouts for Greece in 2010, 2012 and 2015 and the austerity measures and structural reforms implemented by the governments of EMU countries. Moreover, DCC between Greece and the other countries have shown a downward behavior during the acute phases of Greek crisis, suggesting a disintegration of the Hellenic bond market with those of other euro area countries during periods of financial turmoil. Furthermore, the results indicate that the subprime crisis affected a large part of these markets well before the bankruptcy of Lehman Brothers. All these findings provide valuable information for international investors, central bankers and policymakers.

The double‐edged sword of global integration: Robustness, fragility, and contagion in the international firm network

SummaryIncreased global integration of firm, production, and financial networks has the potential to benefit growth but also amplify the transmission of crises. We test whether higher global connectedness is associated with robust (beneficial) or fragile (harmful) behavior using networks derived from firm equity returns across all industries (1991–2016). More globally connected firms are less likely to be in distress, with higher profit, revenue, and equity price growth; however, they are more exposed to direct contagion from distressed neighboring firms. Our analysis reveals the centrality of finance, increased globalization, and greater potential for crises to spread globally when they do occur.

Domestic and Foreign Transmission of the Global Financial Crisis in the Real Economy. The Polish Situation

This paper studies the contagion process of the 2008 Global Financial Crisis through several important Polish economic sectors: chemical, construction, food, IT, media, oil & gas and telecommunication. The results show a signiÖcant di§erence between the response of these sectors to the crisis. Chemical, construction, media and oil and gas were a§ected, in di§erent degrees, by a domestic Önancial contagion. The food industry was ináuenced in a negligible degree by contagion, while the IT and telecommunication sectors showed a decrease of their co-movements with the Önancial sector, both foreign and domestic.

ECB's unconventional monetary policy and spillover effects between sovereign and bank credit risk

PurposeThe paper examines the impact of the deteriorating fiscal conditions of Eurozone countries on spillover effects on bank credit margins. It is investigated whether these effects have been reduced after European Central Bank’s (ECB) signaling of pursuing an expansionary, unconventional, monetary policy to address the debt crisis in Eurozone.Design/methodology/approachA general econometric panel model is applied to investigate spillover effects between Eurozone countries and bank credit margins. In total, three periods are examined: the period before the peak of the global financial crisis and the beginning of the Irish banking crisis, the period during the debt and bank crisis in Eurozone and the period after ECB's signaling of extremely aggressive monetary easing.FindingsAccording to empirical results, before the peak of the global financial crisis there was no substantial credit risk transfer from Eurozone sovereigns to banks. During the period of debt and bank crisis in Eurozone, the deterioration of the fiscal situation of Eurozone countries had a significant impact on bank Credit Default Swap (CDS) spreads. After ECB's signaling of extremely aggressive monetary easing, it does not seem to be any significant relationship between Eurozone sovereigns and bank CDS spreads. These findings reinforce the assessment that ECB's measures were effective, achieving the key objective of normalizing economic conditions and ensuring financial stability in Eurozone.Research limitations/implicationsA question is whether effects can change when the corresponding contraction will lead to a reinstatement of “normal” conditions. Would there be a reversal of risk premium trends in bond markets? Although the answer from casual observations seems to be negative, it is a valid research question to be examined. An interesting issue concerning the unconventional monetary policy measures implemented by ECB concerns the issues of moral hazard that they incorporate, something that could not be addressed. Another research perspective could be the use of the beta coefficient to measure the systematic and unsystematic risk of banking sector shares.Practical implicationsThe results have strong implications for ECB and European banking regulation. Regulators should mainly pay more attention to the amount and concentration of sovereign debt held by banks. Eurozone financial system could be less vulnerable to the sovereign credit risk. It raised the critical question of whether a more strict regulation is needed. Regulators should not intervene if not necessary, but they must prevent the transmission of crises between markets. This will likely bring trust to the developed countries' sovereign debt and the portfolios of the financial institutions, which hold most of this debt will be considered safe as well.Social implicationsThe conclusions provide a safe counterweight in various respects. First, the negative effects and the need to rapidly cease or limit such policies. Second, the financial stability aimed by ECB. Such policies contain the possibility of a subsequent moral hazard related to Member State and bank behavior. However, these contingencies need to be assessed with the benefits resulting from the restoration of financial markets and the disconnection between banking and sovereign credit risk. This leads Eurozone's financial system to become less vulnerable to the sovereign credit risk and therefore more safe, helping to restore confidence in the real economy.Originality/valueContribution in terms of methodology and conclusions. It offers important conclusions regarding the limitations of yields and volatility of CDS spreads. It examines the spillover effects of the fiscal situation of Eurozone countries on banking institutions by extending the existing methodology and introducing new questions focusing on the reaction of CDS market to the ECB monetary policy, the reduction of risk premiums at sovereign and banking level and the gradual reduction of interdependence between them.

INFLUENCE OF ECONOMIC SPACE IMBALANCES ON THE FUNCTIONING OF THE ENTERPRISE FINANCIAL MECHANISM

The purpose of this article is to analyse the nature of imbalances in the economic space, as the problem of impact on the functioning of the financial mechanism of the enterprise is especially relevant for Ukraine, because the results of the domestic financial sector are unbalanced. At the same time, a significant impact is reflected in the functioning of the financial mechanism of the enterprise, expanding its functional load. The instability of economic conditions in Ukraine significantly affects the financial and economic activities of economic entities, which causes non-fulfilment of their planned tasks for the development of their own business. To ensure the successful operation, enterprises must assess the imbalances of the economic space, which are precursors to the development of crisis processes that can have a devastating effect. Methodology. In the course of the research it has been found that the financial mechanism of the enterprise is subject to influence both at the level of the enterprise itself and at the level of economic space. It is determined that the main source of information on the imbalance of the economic space is the balance of payments. Balance of payments is the ratio between the amount of cash received by the country from abroad and the amount of payments abroad during a certain period (year, quarter, month). The main component of the balance of payments is the current account, and the most important item is the balance of goods (trade balance). Its condition determines the state of the balance of payments as a whole, and its dynamics demonstrates the effectiveness of macroeconomic policy. The positive balance of trade indicates an increase in demand for goods and services of the country. The negative balance indicates the low competitiveness of the country’s goods abroad. In the case when the value of exports exceeds the value of imports, a trade surplus is formed. If the value of imports exceeds the value of exports, then there is a trade deficit. The financial account of the balance of payments reflects the sale and repayment of financial claims of one country to another. All financial transactions are classified into three groups: direct investment, portfolio investment, and other investments. The dynamics of the financial account during the study period is negative. This indicator was affected by the crisis in the economy, as well as imperfect legislative support for foreign investors in Ukraine. Results. Theoretical information and structure of the balance of payments are presented, balance of payments articles are analysed, the dynamics of the balance of payments of Ukraine is outlined. The main feature of 2015-2019 is the strengthening of globalization. The intensification of relations between the countries leads to a stronger integration of the whole economy, which in turn creates additional risks associated with the transmission of possible crises in the chain. Value/originality. It is established that the functioning of the financial mechanism of the enterprise is considered under the influence of many factors of the system, in particular economic space. The generation of these imbalances leads to an increase in the vulnerability of the financial mechanism, violating the stability, which is manifested in the inability to resist changes in the situation. By assessing the imbalances of the economic space on the basis of macroeconomic and monetary indicators obtained during the monitoring, economic entities will be able to counteract shocks in the event of a change in the situation.

Effects of financial instability on subjective well-being: a preference-based approach

PurposeThe purpose of this paper is to examine the link between banking crises and the subjective well-being of individuals. In addition, the authors examine the transmission of crises from the banking sector to well-being and show that negative financial shocks have significant adverse effects.Design/methodology/approachThe authors employ agent-based modeling to test for the direct and indirect welfare effects of banking crises. The model includes a support vector machine (SVM) optimized subjective well-being function. The existing literature suggests that this is influenced by both the negative psychological effects of recessions and the adverse economic effects of income loss and increased unemployment.FindingsThe authors show that the different choices of policy response to a banking crisis carry different opportunity costs in terms of welfare and that societal preferences should be taken into account. The authors demonstrate that these effects influence different population classes in an asymmetric manner. Finally, the results demonstrate that the welfare loss of a bank failure is much higher than the cost of a bailout.Practical implicationsThe authors are able to propose to the authorities the best policy mix in order to handle banking crises in the most adequate manner, according to society's preferences between financial stability and public goods.Social implicationsThe findings extend the existing literature on subjective well-being, by quantifying the welfare cost of banking crises and showing that authorities should reconsider bank bailouts as a policy solution to bank distress.Originality/valueThe originality of this article lies in the use of an agent-based model to model the relationship between societal well-being and financial stability. Also, the authors extend existing agent-based methodologies to include machine learning optimization techniques.

Financial Market Integration Between Stock Market From North American Free Trade Agreement (NAFTA) Member

Economic recession or crisis could show a higher possibility of financial crisis transmission in an integrated stock market. Integration between financial markets is a channel of spreading the devastating effects of the crisis. The objective of this study is to detect significant interactions among the stock markets of countries that are members of the North American Free Trade Agreement (NAFTA). NAFTA is a regional partnership with members from the United States, Canada and Mexico that are committed to reducing trade and investment barriers between member countries. The methodology of this research with VAR VECM model consists of three stages, the first analysis of the presence impact of the stock market index using the Granger Causality Test. Second, analyze the speed of response of an index to a change / shock in another index using the Impulse Response Function (IRF). The third stage analyzes the impact of changes / shocks from one index to other indices by using Variance Decomposition. From the 5 sets of stock market data for NAFTA countries, the results of the study show that there is only one cointegration. When viewed in the cointegration process of each of the two data series, cointegration occurs between the Nasdaq index with TSE and Nasdaq with MSE. Whereas TSE and MSE did not find any cointegration.

Study of Stock Markets and Investor Behaviour: Case of the Casablanca Stock Exchange

The emergence of a new stream of research, behavioral finance, linking market behavior and human psychology, seeking to study cognitive biases related to investor behavior that are not explained by traditional financial theory, has opened up several avenues of research related to the behavior of stock market actors and their effects on stock markets. Our empirical study focuses, on the one hand, on the identification of the stock market crises that affected the Casablanca Stock Exchange during the period 2000-2020 and, on the other hand, on the measurement of investors' sentiment on the Moroccan stock market, to verify that the indicator of investors' sentiment is consistent with stock market crises and to find that investors' sentiment is at the origin of the Moroccan stock market crises as defined by Granger. This provides new evidence on the important role played by investor sentiment in the transmission of stock market crises.

A study of systemic risk of global stock markets under COVID-19 based on complex financial networks

In this paper, Granger causalities of stock markets of 20 different countries are estimated from Aug 2019 to Mar 2020. Also, the complex network for global stock markets is established based on the data. Financial risks are identified by comparing the various characteristics of the topology of a complex financial network and the centrality of the stabilization and fluctuation periods. The results demonstrate that COVID-19 leads to close relation of financial connections between various countries, the impact spreads in a shorter distance, and the crisis transmission is faster. Overall, financial crises can be identified using network topological structure and centrality analysis based on network connectivity measurements. The Granger complex network can be employed for measuring and warning the systemic risk.

Stock market returns, volatility, correlation and liquidity during the COVID-19 crisis: Evidence from the Markov switching approach

This paper investigates the relationship between US stock market returns (S&P500) and three indicators of the market, namely implied volatility, implied correlation and liquidity. It also considers the short range dependence between both total confirmed cases and deaths in twelve countries and market movements. We use the two-regime Markov switching model to find the structural break between stock market returns and key stock market indicators. The findings show close dependence between returns and both implied volatility and implied correlation but not with liquidity. The findings indicate the unique role of Italy in crisis transmission.