“Ubiquitous uncertainties”: spillovers across economic policy uncertainty and cryptocurrency uncertainty indices

PurposeThe purpose of this paper is to extend the literature on the spillovers across economic policy uncertainty (EPU) and cryptocurrency uncertainty indices.Design/methodology/approachThis paper uses cross-country economic policy uncertainty indices and the novel data measuring the cryptocurrency price uncertainties over the period 2013–2021 to construct a sample of 946 observations and applies the time-varying parameter vector autoregression (TVP-VAR) model to do an empirical study.FindingsThe findings suggest that there are cross-country spillovers of economic policy uncertainty. In addition, the total uncertainty spillover between economic policies and cryptocurrency peaked in 2015 before gradually decreasing in the following periods. Concomitantly, the cryptocurrency uncertainty has acted as the “receiver.” More importantly, the authors found the predictive power of economic policy uncertainty to predict the cryptocurrency uncertainty index. This paper’s results hold robust when using alternative measurement of cryptocurrency policy uncertainty.Originality/valueThis study is the first research that deeply investigates the association between two uncertainty indicators, namely economic policy uncertainty and the cryptocurrency uncertainty index. We provide fresh evidence about the dynamic connectedness between country-level economic policy uncertainty and the cryptocurrency index. Our work contributes a new channel driving the variants of uncertainties in the cryptocurrency market.

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Economic Policy Uncertainty in the Euro Area: Cross-Country Spillovers and Macroeconomic Impact

Jahrbücher für Nationalökonomie und Statistik ◽

10.1515/jbnst-2018-0083 ◽

2019 ◽

Vol 239 (5-6) ◽

pp. 957-981 ◽

Cited By ~ 1

Author(s):

Volker Clausen ◽

Alexander Schlösser ◽

Christopher Thiem

Keyword(s):

Economic Policy ◽

Structural Var ◽

Policy Uncertainty ◽

Economic Policy Uncertainty ◽

Financial Firms ◽

Macroeconomic Impact ◽

Variance Decompositions ◽

Cross Country ◽

Uncertainty Indices ◽

The Impact

Abstract This paper analyzes spillovers and the macroeconomic effects of economic policy uncertainty (EPU) in Europe over the last two decades. Drawing on the newspaper-based uncertainty indices by Baker et al. (2016, Measuring Economic Policy Uncertainty. Quarterly Journal of Economics 131 (4): 1593–1636), we first use the Diebold and Yilmaz (2014 On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms. Journal of Econometrics 182 (1): 119–134) connectedness index methodology to investigate the static and dynamic patterns of EPU spillovers. We find substantial spillovers across the European countries. Over time, Germany in particular has become increasingly connected to the other economies. In a second step, we investigate the economic impact of EPU shocks using a structural VAR. The detrimental influence of uncertainty turns out to be regime-dependent. We identify a pre-crisis, a crisis and a post-crisis regime, and the effect is only significant in the former two. Finally, the impact of EPU shocks is also heterogeneous across the monetary union’s most important members.

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Dynamic frequency relationships between bitcoin, oil, gold and economic policy uncertainty index

Studies in Economics and Finance ◽

10.1108/sef-05-2021-0165 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Samah Hazgui ◽

Saber Sebai ◽

Walid Mensi

Keyword(s):

Economic Policy ◽

Negative Relationship ◽

Commodity Price ◽

Policy Uncertainty ◽

Low Frequencies ◽

Content Type ◽

Economic Policy Uncertainty ◽

Uncertainty Index ◽

The Us ◽

Multiple Frequencies

Purpose This paper aims to examine the frequency of co-movements and asymmetric dependencies between bitcoin (BTC), gold, Brent crude oil and the US economic policy uncertainty (EPU) index. Design/methodology/approach The authors use a wavelet approach and a quantile-on-quantile regression (QQR) method. Findings The results show a positive interdependence between BTC and commodity price returns at both medium and low frequencies over the sample period. In contrast, the dependence is negative between BTC and EPU index at both medium and low frequencies. Furthermore, the co-movements between markets are more pronounced during crises. The results show that strategic commodities and EPU index have the ability to predict BTC price returns at both medium- and long-terms. The QQR method reveals that higher gold returns tend to predict higher/lower BTC returns when the market is in a bullish/bearish state. Moreover, lower gold returns tend to predict lower (higher) BTC returns when the market is in a bearish (bullish) state (positive (negative) relationship). The lower Brent returns tend to predict higher/lower BTC returns when the market is in a bullish/bearish state. High Brent quantiles tend to predict the lower BTC returns in its extremely bearish states. Finally, higher and lower EPU changes tend to predict lower and higher BTC returns when the market is in a bearish/bullish state (negative relationship). Originality/value There is generally a lack of understanding of the linkages between BTC, gold, oil and uncertainty index across multiple frequencies. This is, as far as the authors know, the first attempt to apply both the wavelet approach and a QQR method to examine the multiscale linkages among markets under study. The findings should encourage the relevant policymakers to consider these co-movements which vary over time and in duration when setting up regulations that deem to enhance the market efficiency.

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The dynamic relationship between economic policy uncertainty and substantial economic growth in China

Marine Economics and Management ◽

10.1108/maem-04-2021-0003 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Junchao Li ◽

Shan Huang

Keyword(s):

Economic Growth ◽

Growth Rate ◽

Economic Policy ◽

Policy Uncertainty ◽

Economic Policies ◽

Causality Test ◽

Content Type ◽

Economic Policy Uncertainty ◽

Different Types ◽

The Relationship

PurposeUnder the background of the overall increase of China's economic policy uncertainty and the urgent need for the transformation and upgrading of the substantial economy, this paper studies the time-varying causality between China's economic policy uncertainty and the growth of the substantial economy through bootstrap rolling window causality test, further refines economic policies and studies the causal differences between different types of economic policies and substantial economic growth, refining the conclusions of previous studies.Design/methodology/approachThis paper first studies the causal relationship between China's economic policy uncertainty and substantial economic growth in the full sample period through bootstrap Granger causality test. Then, the paper tests the short-term and long-term stability of the parameters of the VAR model, and it is found that the model parameters are unstable in both the short and long term, so the results of the Granger causality test of the full sample are not credible. Finally, we conduct a dynamic test of the causal relationship between China's economic policy uncertainty and substantial economic growth by means of rolling window, so as to comprehensively analyze the dynamic characteristics and sudden changes of the relationship between them.FindingsThe research shows that economic policy uncertainty in China has a significant inhibiting effect on the growth of substantial economy. Growth in the substantial economy will drive up economic policy uncertainty before 2016 and restrain it after that. In addition, this paper further subdivides economic policy uncertainty to explore the causal differences between different types of economic policy uncertainty and substantial economic growth. The test results show that the relationship between them has obvious policy heterogeneity. The fiscal policy uncertainty and the monetary policy uncertainty, as the main policy means in China, has a significant impact on the growth rate of substantial economy in multiple ranges, but the effect time is short. Although trade policy uncertainty has a significant impact on the growth rate of substantial economy only during the financial crisis, the effect lasts for a long time. The impact of exchange rate and capital account policy uncertainty on the growth rate of substantial economy is mainly reflected after 2020.Originality/valueThe values of this paper are as follows: First, the economic policy uncertainty is combined with the growth of substantial economy, which makes up the gap of previous studies. Second, the economic policy uncertainty is further subdivided. The paper explores the causal differences between different types of economic policy uncertainties and the growth of substantial economy, so as to make the research more detailed. Finally, different from the previous static analysis, this paper uses dynamic model to examine the relationship between China's economic policy uncertainty and the growth of substantial economy from a dynamic perspective, with richer research conclusions.

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Geopolitical risk, economic growth, economic uncertainty and international inbound tourism: an Indian Illustration

Review of Economics and Political Science ◽

10.1108/reps-07-2020-0081 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Sudeshna Ghosh

Keyword(s):

Economic Growth ◽

Economic Policy ◽

Trade Openness ◽

Policy Uncertainty ◽

Tourism Demand ◽

Content Type ◽

Economic Policy Uncertainty ◽

Long Run ◽

Geopolitical Risks

Purpose This paper aims to consider the role of geopolitical risk in explaining tourism demand in India, a major tourist destination of the Asian region. Furthermore, the study also considers how in addition to geopolitical risk, economic policy uncertainty, economic growth, exchange rate, inflation and trade openness impact tourism demand. Design/methodology/approach The Bayer and Hanck (2013) method of cointegration is applied to explore the relationship between geopolitical risk and tourism demand. Furthermore, the study has also used the auto distributed lag model to determine whether there is a long-run cointegrating association between tourism demand, geopolitical risk, economic policy uncertainty, economic growth, exchange rate and trade openness. Finally, the vector error correction model confirms the direction of causality across the set of the major variables. Findings This paper finds that geopolitical risk adversely impacts inbound international travel to India. This study also obtains the consistency of the results across different estimation techniques controlling for important macro variables. The Granger causality test confirms the unidirectional causality from geopolitical risk to tourism and further from economic uncertainty to tourism. The findings from the study confirm that geopolitical risks have long-term repercussions on the tourism sector in India. The results indicate that there is an urgent need to develop a pre-crisis management plan to protect the aura of Indian tourism. The tourism business houses should develop skilful marketing strategies in the post-crisis to boost the confidence of the tourists. Research limitations/implications This paper provides valuable practical implications to tourism business houses. The tourism business houses can explore geopolitical risk measure and economic policy uncertainty measure to analyse the demand for international tourism in India. Further, the major stakeholders can establish platforms to help tourists to overcome the fear associated with geopolitical risk. Originality/value This study is the first of its kind to explore the geopolitical risks and their long-run consequences in the context of tourism in India. The study puts emphasis on the role of national policy to maintain peace otherwise it would be detrimental to tourism.

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Economic policy uncertainty and stock prices in BRIC countries: evidence from asymmetric frequency domain causality approach

Applied Economic Analysis ◽

10.1108/aea-12-2020-0172 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Mucahit Aydin ◽

Ugur Korkut Pata ◽

Veysel Inal

Keyword(s):

Economic Policy ◽

Frequency Domain ◽

Stock Prices ◽

Policy Uncertainty ◽

Causality Test ◽

Content Type ◽

Economic Policy Uncertainty ◽

Bric Countries ◽

Causality Tests ◽

Asymmetric Causality

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.

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Economic policy uncertainty and fine wine prices

International Journal of Wine Business Research ◽

10.1108/ijwbr-05-2019-0037 ◽

2020 ◽

Vol 32 (3) ◽

pp. 457-476

Author(s):

Nithya Shankar ◽

Bill Francis

Keyword(s):

Economic Policy ◽

Information Criterion ◽

Government Policies ◽

Time Lags ◽

Policy Uncertainty ◽

Content Type ◽

Economic Policy Uncertainty ◽

The Uk ◽

The Impact ◽

Wine Markets

Purpose The paper aims to investigate the impact of economic policy uncertainty (EPU) (i.e. uncertainty due to government policies) on fine wine prices. Design/methodology/approach The paper uses the Baker et al. (2016) monthly news-based measure of EPU for the leading wine markets: the USA, the UK, France, Germany and China in conjunction with monthly fine wine pricing data from the London International Vintners Exchange (Liv-ex). The wine sub-indices used are the Liv-ex 500 (Bordeaux), Burgundy 150, Champagne 50, Rhone 100, Italy 100, California 50, Port 50 and Rest of the World 50. The Prais–Winsten and Cochrane–Orcutt regressions are used for our analyses to correct for effects of serial correlation. Time lags are chosen based on the appropriate information criterion. Findings Changes in EPU levels negatively impact changes in the Liv-ex 500 index for all our leading wine markets except France, the Champagne 50 index for the UK and the Burgundy 150 and the Rhone 100 indices for Germany, with the effects being significant for at least up to a quarter before EPU is detected. The authors did not find significant results for the EPU of France. Practical implications The paper aims to provide insights into whether EPU creates opportunities or threats for investors and wineries. Originality/value A forward-looking news-based EPU measure is used to gain insights into how the different Liv-ex sub-indices react to increases in uncertainty centered around government policies across a sample of different countries.

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Sensitivity of economic policy uncertainty to investor sentiment

Studies in Economics and Finance ◽

10.1108/sef-01-2019-0040 ◽

2019 ◽

Vol 36 (2) ◽

pp. 114-129 ◽

Cited By ~ 2

Author(s):

Mobeen Ur Rehman ◽

Nicholas Apergis

Keyword(s):

Economic Policy ◽

Investor Sentiment ◽

Policy Uncertainty ◽

Momentum Effect ◽

Control Variables ◽

Content Type ◽

Economic Policy Uncertainty ◽

Investor Sentiments ◽

International Investors ◽

The Impact

Purpose This paper aims to explore the impact of investor sentiments on economic policy uncertainty (EPU). The analysis also considers the momentum effect, stock market returns volatility and equity pricing inefficiencies across markets, which, to the best of the authors’ knowledge, has not been addressed in the literature. The role of these control variables has collectively been considered to have important behavioral implications for international investors Design/methodology/approach Quantile regressions are used for estimation purpose, as it provides robust and more efficient estimates rather than those coming from the traditional regression model. Findings The momentum effect is negative and significant only at higher quantiles, while oil prices are positive and significant across all quantiles. The exchange rate exerts a negative and significant effect on EPU, whereas equity price volatility (i.e. investor sentiment) exerts a negative and significant impact on EPU in most of the quantiles. Research limitations/implications The results have important implications for international investors and policymakers, especially in terms of the breakdown of economic policy uncertainty across different sample markets. The breakdown of complete sample period into sub-samples acts as a robust analysis and documents the similarity of the results for the Asian and developed markets cases, but not in the case of the European markets. Practical implications The findings imply the importance of financial stability that impacts the accumulation of systemic risks and adds smoothness to the financial cycle in particular geographical areas. Originality/value The contribution of this paper is threefold. First, existing literature highlights and empirically tests the impact of economic policy uncertainty on different market, macro-economic and global control variables. The analysis, however, performs it in the reverse order, i.e. analyzing the impact of the momentum effect (investor sentiment variables), equity market inefficiencies and volatility (market variables) and exchange rates and Brent oil (control variables). Second, to check the sensitivity of economic policy uncertainty, the analysis analyzes a wide range of markets, segregated as emerging, developed and European regions over the sample period to generate region-wise implications. Finally, the analysis explores the relationship of aforementioned variables with economic policy uncertainty keeping in view the non-linear structure and prior evidence and investor sentiments and economic policy uncertainty in the regression model.

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Impact of economic sentiment and economic policy uncertainty on travel and leisure stock return

Journal of Hospitality and Tourism Insights ◽

10.1108/jhti-05-2020-0070 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Cited By ~ 1

Author(s):

Abobaker Al.Al. Hadood ◽

Farid Irani

Keyword(s):

Economic Policy ◽

Stock Returns ◽

Stock Index ◽

Policy Uncertainty ◽

Medium Term ◽

Content Type ◽

Economic Policy Uncertainty ◽

European Economic ◽

The Uk ◽

Stock Index Returns

PurposeThis paper considers the role of economic sentiment and economic policy uncertainty (both domestic and European) in explaining the changes in the contemporaneous and future travel and leisure stock index returns in top European Union (EU) tourism destinations, namely, in France, Germany, Spain and the UK.Design/methodology/approachThe authors conducted the ordinary least square (OLS) regression estimations to investigate the impact of changes in economic sentiment and economic policy uncertainty on travel and leisure stock returns. Furthermore, the authors used predictive regressions to determine whether economic sentiment and economic policy uncertainty are useful predictors over the short- or medium-term for travel and leisure stock returns.FindingsEmpirical results revealed that, in France and Spain, the changes in regional economic sentiments predominantly and positively affected travel and leisure stock index returns. Also, results indicated that changes in European economic sentiment have a strong positive effect on the future travel and leisure stock returns in Spain and the UK over the short run, while in France, changes in European economic policy uncertainty have a weak negative effect on the future travel and leisure stock returns over the medium-term.Research limitations/implicationsThis paper provides valuable practical implications for investors who trade travel and leisure stocks. Traders can use economic sentiment and economic policy uncertainty to establish arbitrageur strategies.Originality/valueThis study is the first to examine the effects of economic sentiment and economic policy uncertainty (both domestic and European) on contemporaneous and future travel and leisure stock returns in a top European tourism destination.

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