US economic policy uncertainty spillover on the stock markets of the GCC countries
Khandokar Istiak and
Md Rafayet Alam
Journal of Economic Studies, 2020, vol. 47, issue 1, 36-50
Purpose - This study aims to investigate the nature and degree of US economic policy uncertainty spillover on the stock markets of a group of non-conventional economies like the Gulf Cooperation Council (GCC) countries, where a risk-sharing-based financial system is prominent and foreign investment, risk-free interest, derivatives, etc. are not as widespread as in the western economies. Design/methodology/approach - the monthly data of 1992–2018, linear and nonlinear structural vector autoregression (VAR) model, and an impulse response-based test to explore the nature and degree of US economic policy uncertainty spillover on the stock markets of the GCC countries. Findings - This study finds that an unexpected increase in the US economic policy uncertainty significantly decreases the stock market index of all the GCC countries. This study also gets this relationship symmetric, meaning that the GCC stock market indices decrease and increase by the same amount when the US economic policy uncertainty increases and decreases, respectively. Originality/value - This study investigates the characteristics of economic policy uncertainty spillover from the biggest economy of the world to the stock markets of the GCC region, which is new to the literature. The study results provide the first evidence that a risk-sharing based financial system does not necessarily protect the stock market from US uncertainty shock. However, the abundance of local investors, risk-sharing investment activities, the absence of derivatives, etc. may be responsible for the symmetric behavior of a stock market.
Keywords: Risk; Stock market; Economic policy uncertainty; Structural vector autoregression; D81; E44; E60 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://www.emeraldinsight.com/10.1108/JES-11-2018- ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-11-2018-0388
Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Access Statistics for this article
Journal of Economic Studies is currently edited by Professor Mohsen Bahmani-Oskooee
More articles in Journal of Economic Studies from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().