Ripples into waves: Trade networks, economic activity, and asset prices

• 成果类型: Article
• 署名作者: Chang, Jeffery (Jinfan); Du, Huancheng; Lou, Dong; Polk, Christopher
• 署名单位: The Chinese University of Hong Kong, Shenzhen; Central University of Finance & Economics; University of London; London School Economics & Political Science; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.08.005
• 发表日期: 2022
• 页码: 217-238
• 关键词: Sovereign CDS; Return predictability; Trade networks; limited attention; information aggregation

摘要

We exploit information in sovereign CDS spreads and the international trade network to provide causal evidence of the propagation of global economic shocks. We show that trade links are an important source of shock transmission using the natural experiments of the Japanese tsunami and the COVID-19 lockdown in China. We then confirm more general and gradual information flows along the trade network by showing extensive country-level credit/equity cross-sectional return predictability. News about country fundamentals flows primarily from importers to exporters, depends on both direct and indirect links in the trade network, and is magnified by the exporting country's financial vulnerability. (c) 2021 Elsevier B.V. All rights reserved.