ANALYZING THE IMPACT OF BREXIT ON GLOBAL UNCERTAINTY USING FUNCTIONAL LINEAR REGRESSION WITH POINT OF IMPACT: THE ROLE OF CURRENCY AND EQUITY MARKETS

Siphumlile Mangisa (), Sonali Das and Rangan Gupta
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Siphumlile Mangisa: Department of Statistics, Nelson Mandela University, Port Elizabeth, South Africa
Sonali Das: ��Department of Business Management, University of Pretoria, Pretoria, South Africa

The Singapore Economic Review (SER), 2022, vol. 67, issue 04, 1377-1388

Abstract: This paper studies the relationship between monthly economic uncertainty of 20 advanced and emerging markets, and two daily covariates, i.e., exchange rate and stock index, with particular emphasis on the relationship between the variables in response to the Brexit vote. We use a functional data approach supplemented with a point of impact structure to conduct a mixed-frequency analysis. We find that incorporating the point of impact, in this case the Brexit shock, is marginally important relative to models that ignore it. We also find that the exchange rate played a more important role than the equity market in transmitting the Brexit shock to cause heightened uncertainty in the 20 countries considered. Our results have important policy implications.

Keywords: Functional data analysis; point of impact; Brexit; uncertainty; currency and stock markets (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Analysing the Impact of Brexit on Global Uncertainty Using Functional Linear Regression with Point of Impact: The Role of Currency and Equity Markets (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:serxxx:v:67:y:2022:i:04:n:s0217590820460029

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DOI: 10.1142/S0217590820460029

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