The impact of EPU spillovers on the bond market volatility: Global evidence

Yuting Gong, Xiao Li and Wenjun Xue

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: This paper studies the effect of economic policy uncertainty (EPU) spillovers from other countries on local bond market volatility. Using multivariate quantile model (White et al., 2015), we develop a country-specific EPU spillover measure for 23 economies from 2003 to 2019. We find that EPU spillovers have a significantly positive effect on local bond market volatility. This effect becomes stronger if the spillovers are from developed markets and when the spillovers are measured during financial crises. Recognizing the relation between EPU spillovers and bond volatility can motivate policy makers to closely monitor foreign EPU and take actions to alleviate the detrimental influence when foreign EPU rises.

Keywords: EPU spillovers; Country-level bond market volatility; Multivariate quantile model; International asset pricing (search for similar items in EconPapers)
JEL-codes: C10 F30 G12 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003033

DOI: 10.1016/j.frl.2023.103931

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