East-west interconnectedness: a multi-assets network analysis in BRICS and G7 economies

This study investigates the network connectedness among financial markets in emerging and developed countries. Unlike previous studies, we focused on individual market and country data rather than aggregated index-level data to capture the uniqueness of each country. We consider five major financial markets: equity markets, bond markets, currency markets, money markets, and the commodity markets of the BRICS and G7 countries. The inter- and intra-country network connectedness is investigated through the GVAR model and Diebold and Yilmaz approach. The findings show that financial markets are interconnected both within and across countries. They receive information from all other markets and simultaneously transmit it to other markets. However, the pattern and nature of network connectedness vary across countries. The results on within-country connectedness show that in developed countries, the most influential markets in the networks are equity, bond markets, and currency markets. In emerging countries, equity, commodity, and currency markets are the most influential markets in the networks of many countries. The results on cross-country connectedness show that the equity markets of developed countries are more influential in the network. The findings provide a complete structure of connectedness among the financial markets that is important for investors and policymakers to reduce the adverse effects of shocks in one market or country on other financial markets. The comprehensive structure of market connectedness enables effective risk management strategies that help in enhancing financial stability.