Nonlinear network connectedness: Assessing financial risk transmission in MENA and influence of external financial conditions

Balcilar M., USMAN O., Duman G. M.

Emerging Markets Review, cilt.62, 2024 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 62
  • Basım Tarihi: 2024
  • Doi Numarası: 10.1016/j.ememar.2024.101186
  • Dergi Adı: Emerging Markets Review
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, Academic Search Premier, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, PAIS International
  • Anahtar Kelimeler: Economic uncertainty, Financial conditions, Financial connectedness, MENA, Regime switching, Risk transmission
  • İstanbul Ticaret Üniversitesi Adresli: Evet

Özet

This study investigates the influence of global financial market conditions on financial risk connectedness and transmission among the Middle East and North Africa (MENA) economies. Utilizing weekly realized stock market volatilities as a measure of risk and employing a smooth transition threshold vector autoregressive (STVAR) model to analyze risk transmission under varying levels of financial stress, the authors also examine the impact of external macroeconomic conditions on the risk connectedness of MENA economies. The results indicate that the overall connectedness, based on a standard VAR model, is moderate at 48.34%. However, in the low financial stress regime, overall connectedness increases to 52.79%, and in the high financial stress regime, it rises to 72.94%, indicating stronger risk interdependency among MENA countries during times of high stress. In the high financial stress regime, Kuwait, Oman, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates are identified as net risk transmitters among MENA countries. The study also reveals that risk transmission across MENA is more pronounced in the regime-dependent model compared to the overall mean-based VAR model.