The Determinants And Spill-over Effect Analysis Of Financial Stress

In recent years,with the deepening of financial liberalization and economic globalization,the financial linkages and trade links between countries are getting closer and closer.However,with the continuous improvement of the degree of financial openness,the transmission of financial risks between economies is wider and faster.Before and after 2015,the Federal Reserve started official process of raising interest rates and at the same time,China experienced domestic economic restructuring and economic boomed down.Because of the influence of multiple factors at home and abroad,China has accumulated a certain degree of systemic risk in financial sectors,especially in foreign exchange market,stock market,banking system,which reflected the increase in the overall financial pressure.Meanwhile,due to the tight financial and economic ties with mainland China,Hong Kong was also affected to some extent.Under this background,this paper constructed the financial stress index of China and Hong Kong and then studied the spillover effects between the two,and further analyzed the sources of financial stress of China and Hong Kong in the perspective of regional financial stability.Thus this paper can help us correctly identify financial risk of China and Hong Kong,and take macro prudential supervision to prevent the outbreak of regional finance risk.This paper summarized the domestic and foreign literature,and then designed and built the financial stress index of China and Hong Kong.This paper selected TED spreads,stock market returns and the volatility of the stock market,foreign exchange market pressure and sovereign debt spreads in the banking sector,stock market,foreign exchange market and bond market,then respectively used equal variance weighted and principal component analysis method to construct the China FSI and Hong Kong FSI,which can well describe the financial stress.Then we used the Granger causality test and MVGARCH-BEKK model to analyze the dynamic volatility spillover between the two in the chapter three.The results show that there is significant spillover effect of financial pressure between China and Hong Kong.In chapter four,we used the rolling regression model to explore the determinants of financial stress of China and Hong Kong.We can come to the conclusions based this study: For China,the impact of global factors like VIX,LIBOR and US Dollar Index on China showed periodical characteristics in different stages,while the financial stress of Hong Kong has significantly increased China's financial stress and the growth rate of GDP can reduce the domestic financial stress.For Hong Kong FSI,global factors like VIX,LIBOR and US Dollar Index showed periodical characteristics in different stages,financial stress of China has significant positive impact on Hong Kong's financial stress,while trade openness significantly reduce the financial stress and financial openness also has significant positive or negative impact in different period.The results show that there is significant spillover effect of financial stress and influence mechanism between China and Hong Kong.From the perspective of regional financial security and macro prudential,this study has certain significance for taking corresponding measures and implementing the corresponding regulatory policy.