SPILLOVER EFFECTS OF RUSSIA UKRIANE WAR ON TRADING PARTNERS OF RUSSIA

Abstract

The objective of this research is to determine spillover effects of Russia Ukraine war on stock market returns of Russia`s trading partner countries. Trading partner countries are taken as per report of world bank 2022. Apart from this, secondary data from march 2022 to may 2023 with daily frequency is taken. Further, unit root, lag selection criteria, impulse response function and variance decomposition is used for analysis. The results indicated that United Kingdom stock market returns is less responsive to war, whereas China, Germany, Italy and Kazakhstan are parallel responsive towards war of Russia. Russia contributes 1.02% spillover effects on China, 2.45% spillover effects for Germany, 2.8% spillover effects for Italy and 1.17% spillover effects on Kazakhstan throughout war period indicating short and long run spillover effects. Furthermore, first lag was selected based on results and data was stationary at first level as well as returns of stock markets were taken. Hence, this report reveals that partner countries of Russia have respond towards this war and their stock markets are influenced with this war.

Key Words: Russia Ukraine War, Spillover Effects, Stock Market Returns, Impulse Response Functions and Variance Decomposition Model.