The impact of the Russia-Ukraine conflict on the connectedness of financial markets

We investigate the impact of geopolitical risks caused by the Russian-Ukrainian conflict on Russia, European financial markets, and the global commodity markets. We measure the dynamic connectedness among them using time- and frequency-based time-varying parameter vector autoregression (TVP-VAR) approaches. The empirical findings indicate that (i) their relationship has changed due to the conflict; (ii) European equities and Russian bonds are the net transmitters of shocks; and (iii) the conflict affects returns and volatility connectedness among them in terms of short-and long-term frequencies, respectively.

Automated summary

We investigate the impact of the Russian-Ukrainian conflict on Russia, European financial markets, and global commodity markets. The findings show that the relationship among them has changed, with European equities and Russian bonds acting as the main transmitters of shocks. The conflict affects the returns and volatility connectedness among them at short- and long-term frequencies.