Stress Spillovers among Financial Markets: Evidence from Spain

Using a unique database, this paper examines the interconnection among stress indicators of Spanish financial markets during period January 1999 to April 2021, applying both connectedness framework and Time-Varying Parameter Vector Autoregressive approach. Our results suggest that 15.67% total variance forecast errors was explained by shocks across six market indices examined, indicating remaining 84.33% variation due idiosyncratic shocks. Nevertheless, we find varies over time, with surge periods increasing economic instability, mainly driven high levels pandemic economy policy uncertainty real worsening. Financial intermediaries were main generators three out four recent major crises in Spain, while their role as transmitters other has been reduced since onset COVID-19 health crisis. also indicate outbreak represents relevant event transmission all segments.