 The transmission of US economic policy uncertainty shocks to Asian and global financial marketsThe North American Journal of Economics and Finance, 2018, vol. 46, issue C, 222-231 Abstract: This paper proposes a novel approach to investigating the spillover effects of US economic policy uncertainty shocks on the global financial markets. Employing a factor-augmented vector autoregression (FAVAR), we model US economic policy uncertainty jointly with the latent factors extracted from equity prices, exchange rates, and commodity prices. We find that US economic policy uncertainty affects these factors significantly. A country-level analysis shows heterogeneous responses to an increase in US economic policy uncertainty. With regard to equities, US economic policy uncertainty adversely affects equity prices. However, its impact on the Chinese equity market is relatively small. As for foreign exchange markets, while many currencies depreciate in response to an increase in US economic policy uncertainty, the US dollar and the Japanese yen appreciate, reflecting their safe-haven status. The Chinese yuan, whose nominal exchange rate is closely linked to the US dollar, also appreciates in response to uncertainty shocks. Keywords: Spillover; Economic policy uncertainty; Factor-augmented vector autoregression (FAVAR); Asian financial markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:46:y:2018:i:c:p:222-231 DOI: 10.1016/j.najef.2018.04.008 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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