Time-varing effect of policy uncertainty on A-share industry returns— A novel Bayesian approach

Tianxing Zhu, Jinyang Liu, Daixing Zeng and Xuan Miao

PLOS ONE, 2025, vol. 20, issue 6, 1-26

Abstract: The impact of policy uncertainty on A-share industry returns shows significant time-varying characteristics, amplified by industry input-output relationships. Traditional TVP-VAR models overlook network structures, leading to unquantified spillover effects and imprecise systemic risk identification. To address this problem, this study embeds industry input-output tables as matrices into Time-Varying Parameter Spatial Autoregressive Model, and Bayesian methods are innovatively introduced into this model to capture the parameters. Policy uncertainty is categorized into five dimensions—economic, fiscal, monetary, exchange rate, and trade. Empirical results reveal following key findings: On average, network spillover effects explain approximately 39% of the response of A-share industry returns to policy uncertainty. Group analysis reveal that economic and fiscal policy uncertainties exhibit positive network effects, indicating synergistic effect that amplify their impact across industries. In contrast, exchange rate and trade policy uncertainties generate negative network effects, reflecting competitive or substitution effects. Systemic risk is most pronounced in fiscal and trade policy uncertainty groups. Systemic risk increases across all policy uncertainty groups except trade, which shows a declining trend. This study provides a novel framework for understanding the dual nature of spillover effect in production networks, offering valuable insights for policymakers and investors to manage systemic risks and indentify synergistic and competitive effects in interconnected industries.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0326605 (text/html)
https://journals.plos.org/plosone/article/file?id= ... 26605&type=printable (application/pdf)

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:plo:pone00:0326605

DOI: 10.1371/journal.pone.0326605

Access Statistics for this article

More articles in PLOS ONE from Public Library of Science
Bibliographic data for series maintained by plosone ().