The Evolution of Financial Risk Contagion During the Covid-19 Crisis Period : An Analysis Based on the Multiscale Complex Networks

This paper investigates the dynamic characteristics of financial risk contagion during the COVID-19 pandemic based on multiscale complex networks. The data of 45 major international financial markets from July 2019 to March 2021 is collected to conduct the empirical study. The results show that: (1) the degree of financial risk contagion exhibits an inverted U shape for the overall return series and the high-, medium-, and low-frequency components thorough the COVID-19 period, with an increase caused by the aggravated pandemic and a decrease after various countermeasures; (2) the markets that export more risk are not completely the same as those that import more risk; the developed markets which suffers severe pandemic impacts rank top by the out-degree of contagion network, while both developed and emerging markets rank top in terms of the in-degree of contagion network; (3) for the community structure of the complex networks, the markets of major economies belong to the same community during the pandemic period on all time scales, and the high-frequency network changes frequently contrasting a stable community structure of low-frequency network, while the stability of medium-frequency network lies between that on high, and low-frequency, with the network evolving to two communities, namely China’s financial market and other international markets at late phases of the COVID-19 pandemic. Therefore, more targeted countermeasures for maintaining the stability of the financial market should take the impact of major public health events and the multiscale characteristics of the financial risk contagion into consideration