The financial and fiscal stress interconnectedness: the case of G5 economies

Georgios Magkonis, Andreas Tsopanakis

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Abstract

In this paper, we focus on the financial and fiscal stress transmission for the G5 economies. Using financial and fiscal stress indexes, we assess the spillovers within each economy, as well as the cross-sectional effects. Two supplementary methodologies, measuring the degree of interconnectedness, are employed. Our findings indicate that the interactions between these two kinds of distress are intensive, especially during and after the Global Financial Crisis outbreak. The above reiterates the necessity for coordinated macro prudential policies, as a means to confine the adverse effects of excessive financial and fiscal stress.
Original languageEnglish
Pages (from-to)62-69
JournalInternational Review of Financial Analysis
Volume46
Early online date18 Apr 2016
DOIs
Publication statusPublished - Jul 2016

Keywords

  • Financial stress
  • Fiscal stress
  • Spillover index
  • Causality index
  • Macroprudential policies

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