Analysing Market Volatility and Economic Policy Uncertainty of South Africa with BRIC and the USA During COVID-19

Thokozane Ramakau, Daniel Mokatsanyane (), Sune Ferreira-Schenk and Kago Matlhaku
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Thokozane Ramakau: Faculty of Economic Sciences, North-West University, Vanderbijlpark 1900, South Africa
Daniel Mokatsanyane: Faculty of Economic Sciences, North-West University, Vanderbijlpark 1900, South Africa
Sune Ferreira-Schenk: Faculty of Economic Sciences, North-West University, Vanderbijlpark 1900, South Africa
Kago Matlhaku: Faculty of Economic Sciences, North-West University, Vanderbijlpark 1900, South Africa

JRFM, 2025, vol. 18, issue 7, 1-18

Abstract: The contagious COVID-19 disease not only brought about a global health crisis but also a disruption in the global economy. The uncertainty levels regarding the impact of the disease increased volatility. This study analyses stock market volatility and Economic Policy Uncertainty (EPU) of South Africa (SA) with that of the United States of America (USA) and Brazil, Russia, India, and China (BRIC) during the COVID-19 pandemic. The study aims to analyse volatility spillovers from a developed market (USA) to emerging markets (BRIC countries) and also to examine the causality between EPU and stock returns during the COVID-19 pandemic. By employing the GARCH-in-Mean model from a sample of daily returns of national equity market indices from 1 January 2020 to 31 March 2022, SA and China are shown to be the most volatile during the pandemic. By using the diagonal Baba, Engle, Kraft, and Kroner (BEKK) model to analyse spillover effects, evidence of spillover effects from the US to the emerging countries is small but statistically significant, with SA showing the strongest impact from US market shocks. From the Granger causality test, Brazil’s and India’s equity markets are shown to be highly sensitive to changes in EPU relative to the other countries.

Keywords: volatility spillovers; stock market volatility; EPU; BEKK-GARCH (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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