 Economic policy uncertainty and foreign exchange market implied volatility: A complex partial wavelet coherence approachJournal of International Money and Finance, 2025, vol. 156, issue C Abstract: This paper explores the interdependence between economic policy uncertainty (EPU) and foreign exchange implied volatility (FXV) across advanced, European, and emerging (BRICS) markets since 2000 by using a complex partial wavelet coherence approach. The findings indicate that both domestic and US EPUs directly enhance the implied volatility of several currencies across different timescales. In general, the interdependence between EPU and FXV is weak at short-term scales but strengthens over longer timescales. In developed and European markets, substantial evidence indicates that both domestic and US EPUs elevate currency implied volatility, particularly at long-term scales and during periods of extreme market conditions. Among BRICS countries, China alone shows similar patterns. These results imply that EPU can adversely impact the economic performance of more financially integrated developed economies. Keywords: Economic policy uncertainty; Foreign exchange option market; Implied volatility; Complex partial wavelet coherence (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:jimfin:v:156:y:2025:i:c:s0261560625000919 DOI: 10.1016/j.jimonfin.2025.103356 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.