Time-Varying Network Connectedness of G-7 Economic Policy Uncertainties: A Locally Stationary TVP-VAR Approach

Onur Polat ()
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Onur Polat: Department of Public Finance, Bilecik Seyh Edebali University

World Journal of Applied Economics, 2021, vol. 7, issue 2, 47-59

Abstract: This work analyzes the frequency-dependent network structure of Economic Policy Uncertainties (EPU) across G-7 countries between January 1998 and April 2021. We implement an approach that builds dynamic networks relying on a locally stationary Time-Varying Parameter-Vector Autoregressive model using Quasi-Bayesian Local Likelihood methods. We compute short-, medium-, and long-term network connectedness of G-7 EPUs over a period covering several economic/financial turmoils. Furthermore, we structure short-term network topologies for the Global Financial Crisis (GFC) and the COVID-19 pandemic periods. Findings of the study indicate amplified interdependencies between G-7 EPUs around well-known economic/geopolitical incidents, frequency-dependent connectedness networks among them, and stronger interdependencies than the medium-, and long-term linkages. Finally, we find that short-term spillovers are not persistent in the long-term for both turmoil periods.

Keywords: Dynamic networks; TVP-VAR; Pairwise spillovers; Financial connectedness (search for similar items in EconPapers)
JEL-codes: C10 C40 C58 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ana:journl:v:7:y:2021:i:2:p:47-59

DOI: 10.22440/wjae.7.2.2

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