The dynamics and determinants of liquidity connectedness across financial asset markets

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
Format: Article
Published: Elsevier 2022
Subjects:
H Social Sciences (General)
HB Economic Theory
Online Access:http://eprints.um.edu.my/33727/
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Institution: Universiti Malaya
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spelling my.um.eprints.337272022-07-19T04:47:03Z http://eprints.um.edu.my/33727/ The dynamics and determinants of liquidity connectedness across financial asset markets Liew, Ping-Xin Lim, Kian-Ping Goh, Kim-Leng H Social Sciences (General) HB Economic Theory 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. Elsevier 2022-01 Article PeerReviewed Liew, Ping-Xin and Lim, Kian-Ping and Goh, Kim-Leng (2022) The dynamics and determinants of liquidity connectedness across financial asset markets. International Review of Economics & Finance, 77. pp. 341-358. ISSN 1059-0560, DOI https://doi.org/10.1016/j.iref.2021.10.003 <https://doi.org/10.1016/j.iref.2021.10.003>. 10.1016/j.iref.2021.10.003
institution Universiti Malaya
building UM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaya
content_source UM Research Repository
url_provider http://eprints.um.edu.my/
topic H Social Sciences (General)
HB Economic Theory
spellingShingle H Social Sciences (General)
HB Economic Theory
Liew, Ping-Xin
Lim, Kian-Ping
Goh, Kim-Leng
The dynamics and determinants of liquidity connectedness across financial asset markets
description 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.
format Article
author Liew, Ping-Xin
Lim, Kian-Ping
Goh, Kim-Leng
author_facet Liew, Ping-Xin
Lim, Kian-Ping
Goh, Kim-Leng
author_sort Liew, Ping-Xin
title The dynamics and determinants of liquidity connectedness across financial asset markets
title_short The dynamics and determinants of liquidity connectedness across financial asset markets
title_full The dynamics and determinants of liquidity connectedness across financial asset markets
title_fullStr The dynamics and determinants of liquidity connectedness across financial asset markets
title_full_unstemmed The dynamics and determinants of liquidity connectedness across financial asset markets
title_sort dynamics and determinants of liquidity connectedness across financial asset markets
publisher Elsevier
publishDate 2022
url http://eprints.um.edu.my/33727/
_version_ 1739828476097069056

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