International tail risk connectedness: Network and determinants

Abstract

We construct a complete network of directional tail risk connectedness for 32 countries within a Least Absolute Shrinkage and Selection Operator (LASSO) Quantile Regression framework. In addition to highlighting the network's essential features, including the key drivers and receivers of tail risk, we reveal some striking new network determinants. These include the predominant role of economy size, as well as the negative net impact of economic linkages such as trade and capital flows in addition to capital stocks on cross-country tail risk connectedness.