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A Study of Systemic Risk Spillover in China's Financial Market Based on TVP-VAR Modeling

Author(s)

Xiangyi Hou*

Affiliation(s)

China Jiliang University, Hangzhou, Zhejiang, China *Corresponding Author

Abstract

This study employs a Time-Varying Parameter Vector Autoregression (TVP-VAR) model to analyze systemic risk spillovers across China’s money, bond, stock, and foreign exchange markets from 2008 to 2023. The results reveal dynamic interdependencies, with risk transmission exhibiting time-varying patterns. The money market, bolstered by central bank interventions, shows the strongest resilience, while the bond market acts as a stabilizer during turbulence. Conversely, the stock market is highly vulnerable to external shocks, with delayed policy responses. The foreign exchange market, influenced by global capital flows, displays intermediate sensitivity. These findings highlight the need for targeted regulatory measures to mitigate systemic risks, particularly in volatile markets. The study provides empirical insights into financial stability mechanisms in emerging economies.

Keywords

Systemic Risk Spillover; TVP-VAR Model; Financial Markets; Time-Varying Analysis; Risk Resilience

References

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