The dynamics and determinants of liquidity connectedness across financial asset markets

We quantify the degree of liquidity connectedness across stock, bond, money and foreign exchange markets in Malaysia. The liquidity connectedness index from the time-varying parameter vector autoregression model reveals sensitivity to extreme market events but low cross-asset liquidity contagion on...

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Main Authors: Liew, Ping-Xin, Lim, Kian-Ping, Goh, Kim-Leng
格式: Article
出版: Elsevier 2022
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在線閱讀:http://eprints.um.edu.my/33727/
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總結:We quantify the degree of liquidity connectedness across stock, bond, money and foreign exchange markets in Malaysia. The liquidity connectedness index from the time-varying parameter vector autoregression model reveals sensitivity to extreme market events but low cross-asset liquidity contagion on average, implying negligible risk of a systemic liquidity dry-up in the Malaysian financial markets. Further analysis finds that cross-asset liquidity connectedness is explained by global market uncertainty, perceived credit risk as well as international crude oil prices. The influence of external factors underscores the needs for small open economy like Malaysia to expand market surveillance to monitor cross-border liquidity shocks.