SAFE Working Paper No. 407

Bayesian SAR Model with Stochastic Volatility and Multiple Time-Varying Weights

A novel spatial autoregressive model for panel data is introduced, which incorporates

multilayer networks and accounts for time-varying relationships. Moreover,

the proposed approach allows the structural variance to evolve smoothly over time

and enables the analysis of shock propagation in terms of time-varying spillover


The framework is applied to analyse the dynamics of international relationships

among the G7 economies and their impact on stock market returns and volatilities.

The findings underscore the substantial impact of cooperative interactions and

highlight discernible disparities in network exposure across G7 nations, along with

nuanced patterns in direct and indirect spillover effects.