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

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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 interrelation of economic variables means that if a volatility occurs in one variable, this volatility will contagion to other economic variables in a domino effect and causes systemic risk. Therefore, the purpose of this research is to identify the variables that have the most volatility, in addition to assessing the contribution of each variable to the occurrence of systemic risk and the extent of volatility spillover to other variables. In this research, from the 2008 to 2024, the amount of volatility was calculated and prioritized using 6 Entropy methods. Then, the systemic risk of macroeconomic variables growth was calculated on conditional value at risk (∆CoVaR), marginal expected shortfall (MES) and systemic expected shortfall (SES) measures, and the spillover determined using auto regressive model with time varying parameters (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 and GDP. Also, the use of each entropy methods has the same results in the ranking of the volatility. In addition, in all 3 methods of systemic risk, the growth of the ex-change 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.