Home » Safe Havens, Feedback Loops, and Shock Propagation in Global Asset Prices by Franziska Ohnsorge
Safe Havens, Feedback Loops, and Shock Propagation in Global Asset Prices Franziska Ohnsorge

Safe Havens, Feedback Loops, and Shock Propagation in Global Asset Prices

Franziska Ohnsorge

Published May 9th 2014
ISBN : 9781484382394
ebook
45 pages
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 About the Book 

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 inMoreWe 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.