Title: Signed spillover effects building on historical decompositions
Authors: Vladimir Volkov - University of Tasmania (Australia) [presenting]
Mardi Dungey - University of Tasmania (Australia)
Pierre Siklos - Wilfrid Laurier University (Canada)
Abstract: The spillover effects of interconnectedness can be further decomposed into both the sources of shocks and whether they amplify or dampen volatility conditions in the target market. We show how to use historical decompositions to rearrange the information from a VAR to include the sources, direction and signs of spillover effects building on the unsigned forecast error variance decomposition approach. We apply the methodology to a panel of CDS spreads of sovereigns and financial institutions for the period 2003-2013 and identify how these entities contribute to global systemic risk.