The quantile time–frequency connectedness of economic policy uncertainty between China and the G7 countries

Jizhi Zhao, Guangfu Chen and Ying Song

PLOS ONE, 2025, vol. 20, issue 12, 1-20

Abstract: Most of the existing studies on the connectedness among economic policy uncertainties (EPUs) usually neglect the quantile and frequency domain perspectives. To address this limitation, this paper proposes a quantile time–frequency connectedness model to analyze the connectedness among EPUs by combining the quantile and frequency domain dimensions. First, the quantile-vector autoregressive model (QVAR(p)) is estimated and converted into the quantile-vector moving average representation (QVMA(∞)). Next, the generalized prediction error variance decomposition (GFEVD) is computed, from which various types of time-domain connectedness metrics are calculated. Finally, the spectral decomposition method is used to compute frequency-domain connectedness metrics and establish a link between time- and frequency-domain metrics. The empirical results of this paper, based on the sample data of China and G7 countries, reveal several important findings. The EPU of the United States acts as a net transmitter of shocks in both the short and long term, whereas China functions as a net receiver of shocks. The total connectedness index (TCI) demonstrates significant heterogeneity, with its dynamics primarily driven by short-term rather than long-term components. Additionally, connectedness shows substantial improvement under extreme conditions.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0337444

DOI: 10.1371/journal.pone.0337444

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