The impact of economic policy uncertainty and commodity prices on CARB country stock market volatility

Syed Abul Basher, Alfred Haug and Perry Sadorsky

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the impact of economic policy uncertainty shocks and shocks to commodity prices on the realized stock market volatility of the CARB (Canada, Australia, Russia, and Brazil) countries. The CARB countries are important countries to study because they are major commodity exporters. The analysis is conducted using sign restricted impulse response functions (IRFs) and structural vector-autoregressive IRFs. There are some common results across the CARB countries. A positive shock to commodity prices lowers realized stock market volatility while a shock to economic policy uncertainty has a significant positive impact on realized stock market volatility. The magnitudes of the initial impact of these two shocks are similar. Shocks to global economic activity and short-term interest rates lower realized stock market volatility. The impacts of these shocks are more pronounced in models that use sign restrictions. These results have implications for investors and policy makers.

Keywords: Economic policy uncertainty; commodity prices; stock market volatility, sign restricted VAR. (search for similar items in EconPapers)
JEL-codes: E60 G15 G18 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-agr, nep-cis, nep-fmk and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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