US partisan conflict shocks and international stock market returns

Nicholas Apergis () and Ioannis Chatziantoniou

Empirical Economics, 2022, vol. 63, issue 6, No 1, 2817-2854

Abstract: Abstract This paper investigates the impact of US partisan conflict index (PCI) on international stock markets. It extracts innovations from a VAR model and estimates regression specifications. The results document that PCI has a substantial explanatory power. This effect is unique given that (i) traditional disagreement measures per se have no explanatory power, and (ii) neither macroeconomic, nor financial uncertainty measures can undermine the power of PCI. The effect appears to be stronger during periods when the Republican Party is in power. Findings further suggest that this linkage could be seen through the prism of both macroeconomic activity and discount rates.

Keywords: US political uncertainty; International stock markets; VAR modelling (search for similar items in EconPapers)
JEL-codes: G12 G17 P16 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00181-022-02237-1

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