Do Cryptocurrencies Increase the Systemic Risk of the Global Financial Market?. Issue 1 (16th February 2020)

• Record Type: Journal Article
• Authors: Li, Shiyun; Huang, Yiping
• Other Names: Huang Yiping guestEditor.; Shen Yan guestEditor.
• Is Part Of: China & world economy. Volume 28:Issue 1(2020)
• Page Start: 122
• Page End: 143
• Publication Date: 2020-02-16
• Subjects: cryptocurrency -- dynamic risk spillover -- systemic risk; E44 -- F36 -- G15; Economic indicators -- China -- Periodicals; China -- Economic conditions -- 1976- -- Periodicals; China -- Economic policy -- 1976- -- Periodicals; China -- Commerce -- Periodicals; Economics -- China -- Periodicals; 337.951
• DOI: 10.1111/cwe.12314
• Languages: English
• ISSNs: 1671-2234

Abstract

Abstract: The advance of cryptocurrencies has sparked wide concern over their interplay with the existing global financial market. This paper analyzes the risk spillover relation between cryptocurrencies and major financial assets, and unravels how cryptocurrencies could influence global financial systemic risk. We find that cryptocurrencies function as a separate risk source from traditional assets. Major legislative, financial and technological events in the cryptocurrency market may affect risk spillover dynamics. Although the overall penetration of cryptocurrencies is not yet deep, introducing cryptocurrency can significantly increase the systemic risk to traditional markets during low risk level episodes.