Return and volatility spillovers to industry returns: does EMU play a role?

  • Within a two step GARCH framework we estimate the time-varying spillover effects from European and US return innovations to 10 economic sectors within the euro area, the United States, and the United Kingdom. We use daily data from January 1988 - March 2002. At the beginning of our sample sectors in all three currency areas/blocks formed a quite homogeneous group exhibiting only minor sector-specific characteristics. However, over time sectors became more heterogeneous, that is the response to aggregate shocks increasingly varies across sectors. This provides evidence that sector-specific effects gained in importance. European industries show increased heterogeneity simultaneously with the start of the European Monetary Union, whereas in the US this trend started in the early 1990's. Information technology and non-cyclical services (including telecommunication services) became the most integrated sectors worldwide, which are most affected by aggregate European and US shocks. On the other hand, basic industries, non-cyclical consumer goods, resources, and utilities became less affected by aggregate shocks. Volatility spillovers proved to be small and volatile. JEL_Klassifikation: G1, F36

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Author:Bernd Kaltenhäuser
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2002,05
Series (Serial Number):CFS working paper series (2002, 05)
Document Type:Working Paper
Year of Completion:2002
Year of first Publication:2002
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
GND Keyword:Spill-over-Effekt; Europäische Union; GARCH-Prozess; Volatilität; USA; Währungsunion; Großbritannien
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht