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Foreign policy uncertainty shocks and US macroeconomic activity: Evidence from China

Idriss Fontaine (), Laurent Didier and Romain Razafindravaosolonirina ()

Economics Letters, 2017, vol. 155, issue C, 121-125

Abstract: This paper investigates the spillover effects of economic policy uncertainty (EPU) from China on US real macroeconomic variables in both expansion and recession periods. We use monthly data and estimate a Smooth Transition VAR (STVAR) model over the recent period. We find robust evidence that Chinese uncertainty significantly affects US economic activity during busts while no effect is perceptible during booms. The results also underline that Chinese EPU is a determinant of policy uncertainty, unemployment and industrial production in US.

Keywords: Policy uncertainty; China; US; Spillover effect (search for similar items in EconPapers)
JEL-codes: E32 C32 F42 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecolet:v:155:y:2017:i:c:p:121-125