Risk-off shocks and spillovers in safe havens

This paper examines real and financial spillovers to safe haven flow destinations due risk-off shocks in global markets. Using country-specific structural vector autoregression (VAR) models over the period 1990 2021, we show that dynamics for Japan appear be different those of Switzerland US three main ways. First, response episodes, yen effective exchange rate (REER) appreciated significantly, with effect persisting around 25 days. Second, no significant effects on portfolio flows are found, spite effects, suggesting a rapid adjustment markets shifts equilibrium rates. Third, negative from only apply appreciation exacerbating declines GDP growth. Our findings have important implications policymakers managing domestic vulnerabilities associated episodes.