Decomposing the Effect of Domestic and Foreign Economic Policy Uncertainty Shocks on Real and Financial Sectors: Evidence from BRIC Countries

Ameet Kumar, Muhammad Ramzan Kalhoro, Rakesh Kumar, Niaz Hussain Ghumro, Sarfraz Ahmed Dakhan and Vikesh Kumar
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Ameet Kumar: Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan
Muhammad Ramzan Kalhoro: Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan
Rakesh Kumar: Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan
Niaz Hussain Ghumro: Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan
Sarfraz Ahmed Dakhan: Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan
Vikesh Kumar: Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan

JRFM, 2020, vol. 13, issue 12, 1-23

Abstract: This study examines the impact of domestic and foreign shocks on the real and financial sector of BRIC countries. For this purpose, we use a structural vector autoregressive (SVAR) model over the extended period of 1997 to 2016. We conclude that domestic policy shocks have a more substantial impact on Brazilian, Indian, and Russian economy than foreign shocks, while foreign shocks have more contribution in the case of China. Interestingly, results show the negative impact of policy shocks on bank credit provided, implying its role in multiplying the impact of shocks on real variables. Surprisingly EPU of USA has a positive impact on stock markets of India and China, implying capital flight phenomenon, where investor transfer investment from risky to safer places.

Keywords: financial markets; EPU; BRIC; SVAR (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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