How do Financial Markets Listen to the Economic Policy Uncertainty?

Abir Abid ()
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Abir Abid: COGI - Comportements, Organisations et Gouvernance des Institutions - UCO - Université Catholique de l'Ouest

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Abstract: This chapter aims at providing a brief insight on how and to what extent the financial markets can be responsive to the Economic Policy Uncertainty (EPU). Then, after briefly discussing how such an observable phenomenon can be measured, we study how the stock markets behave in economic environment less predictable. Furthermore, apart from its domestic impacts, we analyze the extent to which the EPU in a given country might spill to foreign financial markets. In addition, our analysis is extended to study how the EPU can be a driving force of the equity premium movements. Finally, we examine its potential role as a determinant of the interconnections of the international equity system. The idea is to explore the ways in which the EPU can affect the correlation between financial markets.

Keywords: Economic Policy Incertainty; Financial Markets; spillover effects; equity premium (search for similar items in EconPapers)
Date: 2021
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Published in Financial and Economic Systems, 2021

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05295112

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