Impacts of Global-Economic-Policy Uncertainty on Emerging Stock Market: Evidence from Linear and Non-Linear Models

Mohammad Enamul Hoque and Mohd Azlan Shah Zaidi

Prague Economic Papers, 2020, vol. 2020, issue 1, 53-66

Abstract: Global economic policy uncertainty (GEPU) is one of important phenomena in the global economy; it can impact on the overall economic performance and stock market per-formance, regardless of the status of the world economy. Thus, this paper empirically investigates the impact of global economic policy uncertainty on the Malaysian stock market over the period from 10:2003 to 2017:03. Using the GARCH model, the study demonstrates that global policy uncertainty affects the Malaysian stock market negatively. Similarly, the SVAR model also shows results consistent with the GARCH estimation. Nevertheless, the Markov switching estimation uncovers that global policy uncertainty has negative impacts on stock market performance in both low and high volatile market states. The impact is, however, greater during the high volatile state. Hence, the relationship between global economic policy uncertainty and stock market returns tends to be asymmetric. The overall empirical results infer that global economic policy uncertainty has some implications for asset pricing.

Keywords: Global economic policy uncertainty; GARCH; Markov switching; Malaysia; stock market (search for similar items in EconPapers)
JEL-codes: C58 E32 E37 E44 E52 E62 F50 F65 G10 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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DOI: 10.18267/j.pep.725

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