Research on the Driving Mechanism of Financial Risk Transmission Across Markets——Based on Shadow Banking Perspective
This paper measures the risk spillover coefficients of seven financial markets in China based on the gen-eralized prediction error variance decomposition,and further constructs a large Bayesian vector autoregressive model to explore the impact of the development of shadow banking on the cross-market spillover of financial risk in China.The conclusions show that,first,shadow banking has strengthened the level of cross-market spillovers of financial risk in China,with enhanced net risk spillovers from exchange rate,currency,gold,and commodity markets,and enhanced net risk spillovers into stock,bond,and real estate markets.Second,bond markets were the most pressur-ized of all markets,with the strongest net risk spillover response from money markets to bond markets in particular.Third,further Granger causality tests find that shadow banking breaks the policy constraints on the flow of money mar-ket funds to the bond market and pushes up bond market leverage,which is the root cause of shadow banking-driven spillovers of money market risk to the bond market.
shadow bankingcross-market spillover of risksBayesian estimationVector Autoregressive Model
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