Spillover Dynamics in DeFi, G7 Banks, and Equity Markets During Global Crises: A TVP-VAR Analysis

Younis, Ijaz; Gupta, Himani; Du, Anna Min; Ullah Shah, Waheed; Hanif, Waqas

Abstract

Decentralized finance (DeFi) has become of significant interest for investors in both the financial and digital sectors. We use a time-varying parameter vector autoregression (TVP-VAR) approach to estimate the static and dynamic connections between and within DeFi, G7 banking, and equity markets. We focus on critical events such as the COVID-19 pandemic, the cryptocurrency bubble, and the Russia-Ukraine conflict. The results highlight interconnectedness and significant spillovers within and between the markets, especially during the COVID-19 pandemic. Notably, there were significant spillover effects from the G7 banking and equity markets to Japan and DeFi assets. The findings demonstrate a robust connection between DeFi platforms, G7 banking, and stock markets throughout these tumultuous periods. Policymakers, investors, and entrepreneurs are recommended to keep a close eye on changes in traditional banking and equity markets to adjust the risk of DeFi assets.

Citation

Younis, I., Gupta, H., Du, A. M., Ullah Shah, W., & Hanif, W. (2024). Spillover Dynamics in DeFi, G7 Banks, and Equity Markets During Global Crises: A TVP-VAR Analysis. Research in International Business and Finance, 70(Part B), Article 102405. https://doi.org/10.1016/j.ribaf.2024.102405

• Journal Article Type: Article
• Acceptance Date: May 23, 2024
• Online Publication Date: May 27, 2024
• Publication Date: 2024-06
• Deposit Date: May 30, 2024
• Publicly Available Date: May 30, 2024
• Print ISSN: 0275-5319
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 70
• Issue: Part B
• Article Number: 102405
• DOI: https://doi.org/10.1016/j.ribaf.2024.102405
• Keywords: DeFi, G7 banks and equity markets, Crypto bubble, Ukrainian War, COVID-19