The effects of foreign uncertainty shocks on China’s macro-economy: Empirical evidence from a nonlinear ARDL model

Fenghua Wen, Yilin Xiao and Haiquan Wu

Physica A: Statistical Mechanics and its Applications, 2019, vol. 532, issue C

Abstract: This paper investigates the impacts of uncertainty on China’s macro-economy by a nonlinear cointegrating autoregressive distributed lag (NARDL) model. The three widely used uncertainty proxies—economic policy (EPU), the financial markets (VIX), and energy market (OVX) are considered, and the short-run and long-run nonlinear asymmetric relationship between these three kinds of uncertainty and macroeconomic variables are examined. The empirical results provide significant evidence of short-run relationship between all types of uncertainty shocks and the China’s macro-economy except the effects of OVX on China’s output. Furthermore, in the long run, the results show that the asymmetric VIX seems to be the most relevant determinative uncertainty of China’s macro-economy; the economic policy uncertainty has a long-run asymmetric impact on China’s inflation; the increases in oil price uncertainty may damage China’s output and the decreases in the uncertainty of the energy market may lead to the rises in money supply. The findings of this study have significant implications for investors and policy-makers who are interested in uncertainty risks and who look forward to making more effective decisions.

Keywords: Uncertainty; China’s macro-economy; NARDL model; Asymmetries (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437119311082
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

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:phsmap:v:532:y:2019:i:c:s0378437119311082

DOI: 10.1016/j.physa.2019.121879

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().