A study on predictive analysis and rules for international financial risk considering debt crisis

Abstract

This paper first establishes a system of international financial risk early warning indicators, constructs a VAR forecasting model for international financial risk, and uses the ADF test to identify the best amount of lags for the model before doing a smoothness test on the variables. The lagged values are used as independent variables to establish equations to describe the dynamic relationship between multiple variables. Then the model is tested for cointegration and Grange causality. The VAR model is then used to estimate the financial risk profile from the standpoint of a global economy and to examine the extent to which the debt crisis has affected international financial risk. The results show that at the 5% significant level, national debt expansion is the cause of asset price volatility, macroeconomic volatility, and debt risk. The forecasted inflation rate for 2023-2025 is 4.18, output gap is 4.94, and the policy interest rate is 4.18 for emerging Asian countries and regions.

Keywords

• adf test
• var model
• impulse response
• risk prediction
• 91-02