The uncertainty spillovers of China's economic policy: Evidence from time and frequency domains

Tangyong Liu, Xu Gong and Lizhi Tang

International Journal of Finance & Economics, 2022, vol. 27, issue 4, 4541-4555

Abstract: In this paper, we investigate the uncertainty spillovers among China's four important economic policies (i.e., fiscal, monetary, trade and exchange rate policy) during the period 2000–2020, based on the spillover framework of Diebold and Yilmaz, The Economic Journal, 2009, 119, 158–171 and Diebold and Yilmaz, International Journal of Forecasting, 2012, 28, 57–66. Considering the heterogeneity of shocks in frequency domain, we also use the frequency methodology of Baruník and Křehlík, Journal of Financial Econometrics, 2018, 16, 271–296. Our results are summarized as follows: (a) the uncertainty spillover between China's different economic policies is high (46.11%) and the low‐frequency spillover (24.90%) is higher than the high‐frequency spillover (19.65%); (b) fiscal policy acts as the mainly uncertainty transmitter on high‐frequency, while monetary policy on low‐frequency; (c) the uncertainty spillover increased in the global financial crisis (2007–2009) and the European debt crisis (2010–2011) and (d) we found that the increase in the former is due to long‐term shocks, while the latter is due to short‐term shocks.

Date: 2022
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