EPU spillovers and exchange rate volatility

Yuting Gong, Zhongzhi He and Wenjun Xue

International Review of Financial Analysis, 2025, vol. 97, issue C

Abstract: This paper examines the spillover effect of economic policy uncertainty (EPU) on real effective exchange rate volatility in a sample of 23 countries. We use a multivariate quantile model to measure EPU spillovers for each country and find that EPU spillovers have a significant and positive effect on subsequent exchange rate volatility in both developed and emerging markets. The spillover effect is stronger in emerging markets compared to developed markets. EPU spillovers generated from developed markets are larger than those originated from emerging markets. The EPU spillover effect is particularly strong during the period of global financial crisis. The positive relationship between EPU spillovers and exchange rate volatility remains significant in various robustness checks.

Keywords: EPU spillovers; Multivariate quantile model; Exchange rate volatility (search for similar items in EconPapers)
JEL-codes: C10 F31 G10 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:97:y:2025:i:c:s1057521924007567

DOI: 10.1016/j.irfa.2024.103824

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