European Parliament Library

Safe Havens, Feedback Loops, and Shock Propagation in Global Asset Prices, Franziska Ohnsorge, Marcin Wolski, Yuanyan Zhang

We create a network of bilateral correlations of changes in sovereign bond yields and individual bank equity price changes since 2000. We extract some stylized facts from this network of asset price correlations and document the clear differences in asset price correlations between safe havens and non-safe havens: safe havens, as commonly defined, have higher sovereign-sovereign, bank-bank, and bank-sovereign correlations than nonsafe havens. In a simple shock propagation model, we illustrate how these higher correlations may turn safe havens into shock propagators. While we discuss safe havens as a group, we document how the US is in a category of its own, differing significantly from the other countries including Switzerland or Japan. Separately, we find that feedback loops amplify shocks, and those emanating from bank stress more than those emanating from sovereign stress
Table Of Contents
Cover; Abstract; Contents; I. Introduction; II. Data; III. Stylized Facts; IV. Mapping the Network of Sovereign Bond Yields and Bank Equity Prices; V. Defining Safe Havens; VI. Modeling Shock Propagation; A. Baseline Results; B. Feedback Loops in Shock Propagation; C. The Role of Safe Havens in Shock Propagation; VII. Conclusions and Issues for Further Research; Appendix I: Shock Propagation Mechanism
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (46 p.)
Specific Material Designation
Form Of Item

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