On the link between the US economic policy uncertainty and exchange rates

Yosuke Kido

Economics Letters, 2016, vol. 144, issue C, 49-52

Abstract: Employing dynamic conditional correlation GARCH (DCC-GARCH) model, this paper analyzes spillover effects of the US economic policy uncertainty shock on real effective exchange rates with the data from January 2000 to December 2014. We find that the correlations between the US EPU and the returns of the high-yielding currencies are consistently negative throughout the sample period, while the correlation between the US EPU and the returns of Japanese yen is consistently positive. Moreover, we find that the correlations tend to be intensified during two post-2000 recession episodes.

Keywords: Economic policy uncertainty; Spillover; Dynamic conditional correlation; Real effective exchange rate (search for similar items in EconPapers)
JEL-codes: F3 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (83)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:144:y:2016:i:c:p:49-52

DOI: 10.1016/j.econlet.2016.04.022

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