A1425
Title: Time-varying connectedness between the US futures markets and the macroeconomy
Authors: Aris Kartsaklas - Brunel University London (United Kingdom) [presenting]
Awon Almajali - Brunel University London (United Kingdom)
Abstract: The aim is to examine the connectedness, in return and volatility systems, among futures markets and macroeconomics variables from 1997 to 2015, covering two significant crises: the global financial crisis and the tech bubble. We utilize a time-varying parameter VAR model (TVP-VAR), which is based on the recently developed connectedness approach. The results show a changing level of connectedness with an average of 70.5\% for return and 75.6\% for volatility. We find that macroeconomic variables are the main contributors to the overall forecast error variance, a result that holds at both return and volatility levels. For example, non-borrowed reserves and total reserves show the highest contributions among all other macro and finance variables. Overall, our findings are robust to Bayesian prior choice and reflect the rapid influences of both crises, which is essential to formulate policies that seek to achieve financial stability.
