Evaluation Systemic Risk and Volatility Contagion of Macroeconomic Variable with Entropy’s and TVP-VAR

Subject Areas : Financial Mathematics

Mehdi Mohammad Pour ¹ , Majid Zanjirdar ^{2 *} , Peyman Ghafari Ashtiani ³

1 - Department of Management, Ar.c., Islamic Azad University, Arak, Iran
2 - Department of Finance, Ar.c., Islamic Azad University, Arak, Iran
3 - Department of Management, Ar.c., Islamic Azad University, Arak, Iran

Received: 2025-02-21 Accepted : 2025-05-05 Published : 2025-11-09

Keywords: Systemic Risk , Entropy , Conditional Value at Risk, Marginal Expected Shortfall , Systemic Expected Shortfall,

Abstract :

The intertwining of different sectors of the economy has caused that in case of volatility in one sector spreads in a domino-like manner to other economic sectors and causes systemic risk. Therefore, it is necessary to identifying the variables that have the highest volatility, to evaluate the contribution of each variable to the occurrence of systemic risk and the amount of their influence. In this research, from the 2007 to 2023, the amount of volatility was calculated and prioritized using 6 Entropy methods. Then, the systemic risk of macroeconomic variables growth was calculated on ∆CoVaR, MES and SES measures, and the spillover determined using TVP-VAR. Findings show: the highest volatility is related to the total index of Tehran Stock Exchange, price of Imam coin and gold, dollar rate, liquidity & GDP. Also, the use of each Entropy methods has the same results in the ranking of the volatility. In all 3 methods of systemic risk, the growth of the exchange rate is the cause of systemic risk and the initiator of contagion. Also, the growth of the total index of the Tehran Stock Exchange and liquidity recipient the spillover and share of negative news higher than positive news.

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