When Yen Funding Unwinds: Dynamic, Frequency, and Quantile Connectedness across China, Japan, Korea, and India during the August 2024 Carry-Trade Shock

Challa Gopiraju

doi:10.55047/transekonomika.v6i4.1244

Authors

Challa Gopiraju* School of Management, Anurag University, Venkatapur, Ghatkesar, Hyderabad 500088, Telangana, India https://orcid.org/0009-0001-7197-7914

DOI:

https://doi.org/10.55047/transekonomika.v6i4.1244

Keywords:

Asian Equity Markets, Connectedness, Frequency Spillover, Quantile Connectedness, Yen Carry Trade

Abstract

Backgrounds: The August 2024 unwinding of yen-funded carry-trade positions produced one of the sharpest episodes of cross-market turbulence in Asian equities since the pandemic, yet its transmission through the China-Japan-Korea-India equity network had not previously been examined as a dedicated event.

Objectives: This study aimed to quantify the change in total connectedness associated with the episode, to decompose that change by transmission horizon and by return-distribution quantile, and to determine whether net-transmitter and net-receiver roles within the network changed as a result of the shock.

Methodology: Dynamic, frequency-domain, and quantile connectedness were estimated using a time-varying parameter vector autoregression fitted to daily returns for the four markets from January 2019 to June 2026, and regime differences were tested using a block bootstrap benchmarked against a placebo window.

Findings: Total connectedness rose by approximately 11 percentage points during the event window relative to a clean six-month pre-event baseline, about four times larger than the change observed in the placebo window. Transmission was concentrated at short horizons, accounting for close to four-fifths of total connectedness, and the gap between typical-state and tail-state connectedness compressed sharply during the event. Korea and Japan remained the network’s two net transmitters throughout, while China and India exchanged their ranking as net receivers, a reordering that persisted afterward.

Conclusions: The episode intensified transmission along an unchanged transmitter hierarchy while producing a persistent reordering of the receiving side of the network within the observed post-event sample.

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