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Static and dynamic liquidity spillovers in the Eurozone: The role of financial contagion and the Covid-19 pandemic

Grillini, S., Ozkan, A., Sharma, A. (2022) Static and dynamic liquidity spillovers in the Eurozone: The role of financial contagion and the Covid-19 pandemic. International Review of Financial Analysis, 83 . Article Number 102273. ISSN 1057-5219. (doi:10.1016/j.irfa.2022.102273) (KAR id:97221)

Abstract

This paper investigates static and dynamic liquidity spillovers for a pool of ten Eurozone countries for the period 2000–2021. We estimate a generalised vector autoregressive (VAR) model based on Diebold and Yilmaz (2009, 2012). We find evidence for static and dynamic transmission of shocks through the liquidity channel. We propose a static measure of liquidity spillovers which captures total and pairwise average spillovers across Eurozone countries. Our measure shows strong evidence of interconnection within the Eurozone through the liquidity channel. We investigate the dynamic intensity and direction of liquidity spillovers, finding significant evidence of contagion during crisis periods. Our results indicate that most of the shocks during periods of financial uncertainty arise from leading economies within the Euro area.

Item Type: Article
DOI/Identification number: 10.1016/j.irfa.2022.102273
Uncontrolled keywords: COVID-19 pandemic, Dynamic, Financial contagion, Liquidity spillovers, Static
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Kent (https://ror.org/00xkeyj56)
Depositing User: Aydin Ozkan
Date Deposited: 04 Oct 2022 10:42 UTC
Last Modified: 05 Oct 2022 11:38 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/97221 (The current URI for this page, for reference purposes)

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