Macro-Financial Spillovers

56 Pages Posted: 25 Jan 2017 Last revised: 26 Oct 2020

See all articles by John Cotter

John Cotter

University College Dublin; University of California, Los Angeles (UCLA) - Anderson School of Management

Mark Hallam

University of Essex - Essex Business School

Kamil Yilmaz

Koc University

Date Written: October 6, 2020

Abstract

We analyse spillovers between the real and financial sides of the US economy allowing for differences in sampling frequency between financial and macroeconomic data. We show that financial markets are typically net transmitters of shocks to the real side of the economy, particularly during turbulent market conditions. Our macro-financial spillover measures are found to have significant predictive ability for future US macroeconomic conditions in both in-sample and out-of-sample forecasting environments. Furthermore, the predictive ability of our macro-financial measures frequently exceeds that of purely financial systemic risk measures previously employed in the literature for the same task.

Keywords: spillovers, connectedness, macro-financial, mixed-frequency, forecasting

JEL Classification: G10, G01, E30, E44, C13, C32

Suggested Citation

Cotter, John and Hallam, Mark and Yilmaz, Kamil, Macro-Financial Spillovers (October 6, 2020). Michael J. Brennan Irish Finance Working Paper Series Research Paper No. 20-12, Available at SSRN: https://ssrn.com/abstract=2904536 or http://dx.doi.org/10.2139/ssrn.2904536

John Cotter

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://https://johncotter.org/

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Mark Hallam (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

HOME PAGE: http://www.essex.ac.uk/ebs/staff/profile.aspx?ID=5100

Kamil Yilmaz

Koc University ( email )

Rumeli Feneri Yolu
Sariyer
Istanbul, 34450
Turkey
+90 212 338 1458 (Phone)
+90 212 338 1653 (Fax)

HOME PAGE: http://https://sites.google.com/view/kamilyilmaz/

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