Dynamic Spillover Effect Between Oil Prices and Economic Policy Uncertainty in BRIC Countries: A Wavelet-Based Approach

Purpose The aim of this study is to investigate the relationship between economic policy uncertainty (EPU) and stock prices during the period from March 2003 to March 2021. Design/methodology/approach The study uses asymmetric and symmetric frequency domain causality tests and focuses on BRIC countries, namely, Brazil, Russia, India and China. Findings The findings of the symmetric causality test confirm unidirectional permanent causality from EPU to stock prices for Brazil and India and bidirectional causality for China. However, according to the asymmetric causality test, the findings for China show that there is no causality between the variables. The results for Brazil and India indicate that there is unidirectional permanent causality from positive components of EPU to positive components of stock prices. Moreover, for Brazil, there is unidirectional temporary causality from the negative components of EPU to the negative components of stock prices. For India, there is temporary causality in the opposite direction. Originality/value The reactions of financial markets to positive and negative shocks differ. In this context, to the best of the authors’ knowledge, this study is the first attempt to examine the causal relationships between stock prices and uncertainty using an asymmetric frequency domain approach. Thus, the study enables the analysis of the effects of positive and negative shocks in the stock market separately.

Download Full-text

Impact of US Economic Policy Uncertainty on Geopolitical Risk. Evidence from BRIC Economies

Pénzügyi Szemle = Public Finance Quarterly ◽

10.35551/pfq_2020_4_3 ◽

2020 ◽

Vol 65 (4) ◽

pp. 485-496

Author(s):

Imtiaz Arif ◽

Amna Sohail Rawat ◽

Muhammad Shahbaz

Keyword(s):

Economic Policy ◽

Financial Market ◽

Investment Decisions ◽

Policy Uncertainty ◽

Estimation Technique ◽

Economic Policy Uncertainty ◽

Bric Countries ◽

The Us ◽

Asymmetric Relation ◽

The Relationship

This paper estimates the relationship between US economic policy uncertainty and geopolitical risk in the BRIC economies.1 Due to the assumption of a non-linear and asymmetric relation between US economic policy uncertainty and geopolitical risk of BRIC countries, a nonparametric estimation technique, Quantile on Quantile approach has been used for empirical analysis. The empirical results revealed that the relationship between the US economic policy uncertainty and geopolitical risk of BRIC economies is heterogeneous in nature. We noted that economic policy uncertainty in the US is negatively related to geopolitical risk in Chinese and Russian economies. However, for Indian and Brazilian economies US economic policy uncertainty is positively related to geopolitical risk. The outcomes of the study will be helpful for the investors and financial market players for taking investment decisions. It will also benefit the legislators and policymakers in making policies that could make their respective economies insulated from foreign policy risks.

Download Full-text

The Impact of Foreign Exchange and Oil Prices Shocks on the Novel Google Trend Based Index of Economic Policy Uncertainty: A Case of Developing Country

Celal Bayar Üniversitesi Sosyal Bilimler Dergisi ◽

10.18026/cbayarsos.855000 ◽

2021 ◽

pp. 287-298

Author(s):

Umut Burak GEYİKCİ ◽

Fatma İZMİRLİ ATA ◽

Lale DEMİRLİOĞLU

Keyword(s):

Economic Policy ◽

Developing Country ◽

Foreign Exchange ◽

Oil Prices ◽

Policy Uncertainty ◽

The Novel ◽

Economic Policy Uncertainty ◽

The Impact

Download Full-text

Mixed frequency domain spillover effect of international economic policy uncertainty on stock market

Kybernetes ◽

10.1108/k-11-2020-0755 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Shuzhen Zhu ◽

Xiaofei Wu ◽

Zhen He ◽

Yining He

Keyword(s):

International Economic ◽

Economic Policy ◽

Stock Market ◽

Frequency Domain ◽

Time Domain ◽

Spillover Effect ◽

Spillover Effects ◽

Policy Uncertainty ◽

Content Type ◽

Economic Policy Uncertainty

Purpose The purpose of this paper is to construct a frequency-domain framework to study the asymmetric spillover effects of international economic policy uncertainty on China’s stock market industry indexes. Design/methodology/approach This paper follows the time domain spillover model, asymmetric spillover model and frequency domain spillover model, which not only studies the degree of spillover in time domain but also studies the persistence of spillover effect in frequency domain. Findings It is found that China’s economic policy uncertainty plays a dominant role in the spillover effect on the stock market, while the global and US economic policy uncertainty is relatively weak. By decomposing realized volatility into quantified asymmetric risks of “good” volatility and “bad” volatility, it is concluded that economic policy uncertainty has a greater impact on stock downside risk than upside risk. For different time periods, the sensitivity of long-term and short-term spillover economic policy impact is different. Among them, asymmetric high-frequency spillover in the stock market is more easily observed, which provides certain reference significance for the stability of the financial market. Originality/value The originality aims at extending the traditional research paradigm of “time domain” to the research perspective of “frequency domain.” This study uses the more advanced models to analyze various factors from the static and dynamic levels, with a view to obtain reliable and robust research conclusions.

Download Full-text