Dual nature of spillovers: Contemporary and lagged connectedness in oil shocks, geopolitical risk, and EURO financial stress

Abstract

We employed the novel R2 decomposed connectedness approach to analyze the interplay among oil market shocks, geopolitical risk, global economic conditions, and EURO financial stress. Our findings demonstrate significant interconnectedness, characterized by moderate contemporaneous and lagged spillover effects. Our findings exhibit that geopolitical risk threats propagate shocks to countries such as Austria, Denmark, Finland, France, Germany, Netherlands, Spain, Sweden, and the UK. In contrast, global economic conditions and other factors serve as recipients of those shocks. Furthermore, our time-varying measures unveil fluctuations in interconnectedness during pivotal events such as wars, financial crises, and shifts in OPEC policies.