 Exploring the relationship between China's economic policy uncertainty and business cycles: Exogenous impulse or endogenous responses?Li Yujia, Zhu Zixiang and Che Ming Emerging Markets Review, 2024, vol. 58, issue C Abstract: This paper explores China's endogeneity of economic policy uncertainty (EPU). Previous studies have disagreed on the causal relationship between uncertainty and the business cycle. By using shock-based restrictions, we identify structural shocks and investigate the endogeneity of China's EPU index. The findings suggest that an increase in EPUs is more likely to cause fluctuations in the Chinese economy than the reverse. The paper also uncovers spillovers of China's EPU on the US EPU, indicating a national strategy at play. In the long run, EPU shocks in China account for at least 22% of China's economic activity variation and 30% of the US EPU variation. These findings remain consistent when accounting for the COVID-19 period, adopting heteroskedasticity identification schemes, and using alternative EPU indexes. Keywords: Economic policy uncertainty; Shock-based restrictions; Cyclical fluctuations (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:ememar:v:58:y:2024:i:c:s156601412300095x DOI: 10.1016/j.ememar.2023.101090 Access Statistics for this article Emerging Markets Review is currently edited by Jonathan A. Batten More articles in Emerging Markets Review from Elsevier |
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