*Asymmetric TVP-VAR Connectedness Approach: The Case of South Africa DOI: http://dx.doi.org/10.5772/intechopen.107248*

**Table 4.**

*Empirical findings of asymmetric connectedness analysis with TVP-VAR approach.*

#### **Figure 2.**

*Asymmetry of dynamic total connectedness. Note: Results are obtained from TVP-VAR model. This model is established with the lag length of order one (BIC). We use a 20-step-ahead "generalised forecast error variance decomposition".*

**Figure 3.** *Dynamic net total directional connectedness.*

shock on the country**'**s economy also shows an asymmetrical spillover on the exchange rates. However, this asymmetric effect does not differ much in terms of positive and negative effects on exchange rates. This is related to the fact that the shock of CDS (cds.Y) from exchange rate (rd.Y) is (10.11), which is greater than the shock of exchange rates (rd.Y) from CDS (cds.Y). For this reason, the effects of a shock, whether from exchange rates or CDSs, on CDSs after a period will be greater anyway.

The important point here is that there is a difference between the shock value of each variable from the total connectedness and the total shock of each positive and negative shock. Suppose this situation is considered as a difference in the spillover effects from the total connectedness to the positive and negative, and from the positive *Asymmetric TVP-VAR Connectedness Approach: The Case of South Africa DOI: http://dx.doi.org/10.5772/intechopen.107248*


#### **Figure 4.**

*Dynamic net pairwise directional connectedness. Notes: Results are obtained from TVP-VAR model. This model is established with the lag length of order one (BIC). We use a 20-step-ahead "generalised forecast error variance decomposition". Black area shows the symmetric pairwise connectedness. Green and red lines indicate the "positive and negative pairwise connectedness measures", respectively.*


#### **Figure 5.**

*Net pairwise directional connectedness.*

and negative to the total connectedness. In that case, it is seen that there is a significant asymmetric effect due to the interaction between the exchange rates and CDS in South Africa. Considering the openness of the South African economy, novel monetary policy implementations are needed to manage this asymmetry. Within the framework of the knowledge that the CDSs are the main risk indicator in international markets, public finance should also be considered in the new regulation process in South Africa.

Even if the values in **Table 4** seem to be relatively close to each other when making interpretations, it should be considered that they are all obtained from daily data. The fact that the total connectivity among the data we have analysed is 73%, provides important information. The empirical findings of the study provide valuable


#### **Table 5.**

*Summary of negative and positive events in South Africa - 2014–2018.*

information for the establishment of macro-financial stability policies and give reliable information about the future risk directions in the economy. This can be considered, especially regarding South Africa**'**s presence in international financial markets with the country**'**s main export items, which are the financialised commodities.
