Professor Kamil Yilmaz (Koc University)

Profile photo of Professor Kamil Yilmaz (Koc University)

Financial and Macroeconomic Connectedness: A Network Approach to Measurement and Monitoring

With Kamil Yilmaz, Professor of Economics at Koç University

5-6 September 2022

Classes: 9am -12pm, 1.30pm - 4.30pm
University of Glasgow Main Building

We provide a brief review of vector autoregressions, introduce the connectedness framework, cover a variety of applications, and supply and illustrate software that you can use and modify for your applications.

Who should attend

Economists who want to understand recent developments in measuring, monitoring, and modeling network connectedness in financial institutions, financial markets, and underlying macroeconomic fundamentals. 

Course level

Intermediate / advanced

Topics covered

The lectures will be drawn from Financial and Macroeconomic Connectedness (FMC) and the listed articles, covering both methods and applications. The applications will emphasise financial institutions, markets, and the underlying macroeconomic fundamentals.

Software requirements

R (intermediate level)

Learning outcomes

By the end of this course, you will be able to:

  1. build and estimate high dimensional VARs for joint modelling of time series and undertake impulse response and variance decomposition analysis,
  2. programme and estimate aggregate and granular measures of connectedness and analyse how shocks to a system of variables propagate across the system and overtime,
  3. Apply the connectedness analysis to financial and macroeconomic time series and undertake graphical and econometric analysis of the determinants of the connectedness over time.

Tentative outline

Time Series Data and Vector Autoregressions (half day)

  • Time Series Properties of Data
  • Vector Auto Regressions
    • Specification; Stationarity; Estimation; Optimal Choice of Lag Order
  • Analysing Vector Autoregressions
    • Granger Causality Testing
    • Impulse Response Functions
    • Variance Decompositions
  • Unit Roots & Cointegration (if time permits)

Financial and Macroeconomic Connectedness (one and a half-days)

  1. Introduction
  2. From Variance Decompositions to Connectedness
  3. Network Connectedness & Gephi Software
  4. Global Business Cycle Connectedness
  5. High Dimensional VARs, Lasso & Connectedness
  6. Global Connectedness: Stocks, Banks & Sovereign Credit Risk
  7. Monetary Policy & Bond Market Connectedness
  8. Input-Output Networks & Inflation Connectedness
  9. Mixed Frequency VARs & Macro-Financial Connectedness


Diebold, F.X. and Yilmaz, K. (2015), Financial and Macroeconomic Connectedness: A Network Approach to Measurement and Monitoring ("FMC"). Oxford: Oxford University Press.  

Akovali, U. and Yilmaz, K (2021), “Unconventional Monetary Policy and Sovereign Bond Return Connectedness in the New Normal,” mimeo, KU-TUSIAD ERF Working Paper No. 2101, June 2021

Bilgin, M. N. and Yilmaz, K. (2021) “Producer Price Inflation Connectedness and Input-Output Networks,” Koç University-TUSIAD Economic Research Forum, Working Paper 1813.

Bostanci, G. and Yilmaz, K. (2020) “How Connected is the Global Sovereign Credit Risk Network?” Journal of Banking and Finance, 113.

Cotter, J.,  Hallam, M. and Yilmaz, K. (2021), "Macro-Financial Spillovers," mimeo.

Demirer, M., Diebold, F.X., Liu, L. and Yilmaz, K. (2012), "Estimating Global Bank Network Connectedness," Journal of Applied Econometrics, 33(1):1-15, 2018.

Diebold, F.X. and Yilmaz, K. (2014) “On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms,” Journal of Econometrics, vol. 182, No. 1, 119-134.

Diebold, F.X. and Yilmaz, K. (2012) “Better to Give than to Receive: Forecast-Based Measurement of Volatility Spillovers,” International Journal of Forecasting, vol. 28, issue 1, pp. 57-66, January-March.


Kamil Yilmaz is a Professor of Economics at Koç University and an elected member of the Science Academy, Turkey. He holds PhD (1992) and MA (1990) degrees in economics from the University of Maryland, College Park, and a BA degree in economics from Boğaziçi University (1987). Professor Yilmaz worked as an economist in the Research Department of the World Bank (1992-1994) and visited the Department of Economics of the University of Pennsylvania in 2003-2004 and 2010-2011 academic years. He has published two books and numerous articles in the leading international academic journals and in edited volumes on macroeconomics, financial econometrics, international trade, and the Turkish economy. He has lectured on financial econometrics and policy applications at IMF, Bank of Indonesia, Bank of Thailand, and the SEACEN Centre. He is the recipient of the Turkish Academy of Sciences Encouragement Award in Social Sciences (2003). Professor Yilmaz served as the director of Koç University-TUSIAD Economic Research Forum (2007-2009) and the associate director of the Graduate School of Social Sciences and Humanities at Koç University (2015-2018).