Comparing the impact of Chinese and U.S. economic policy uncertainty on the volatility of major global stock markets

Yujie Shi and Liming Wang

Global Finance Journal, 2023, vol. 57, issue C

Abstract: This study compares the impact of Chinese and U.S. economic policy uncertainty (EPU) (proxied by the EPU index) on the volatility of 11 major stock markets. Unlike previous research that only utilizes monthly EPU for such a comparison, this study uses both daily and monthly data to examine the impact within a month as well as over months. In order to provide a detailed analysis, EPU shocks are investigated from a two-sided viewpoint: one considering the effects of EPU indices as exogenous shocks, and the other examining the spillovers from EPU indices as endogenous variables. Meanwhile, the role of global turmoil, such as the 2007–2008 global financial crisis (GFC) and the COVID-19 pandemic, in influencing the impact of Chinese (or U.S.) EPU is highlighted. The results show that the impact of U.S. EPU is reinforced at both daily and monthly frequencies during the GFC, with a greater effect on the European stock markets. After the GFC, the rising influence of Chinese EPU is observed at a monthly frequency in several markets in Asia and elsewhere. Overall, the dynamic spillovers from the EPU indices to stock volatility suggest the dominant role of U.S. EPU in most markets at a daily frequency, while the extent of the spillovers is driven by turbulent events, including the GFC and the COVID-19 pandemic.

Keywords: Economic policy uncertainty; Spillovers; Global financial crisis; Stock market volatility; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: F30 F65 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 (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1044028323000558
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:57:y:2023:i:c:s1044028323000558

DOI: 10.1016/j.gfj.2023.100860

Access Statistics for this article

Global Finance Journal is currently edited by Manuchehr Shahrokhi

More articles in Global Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().