The international spillover effects of US Quality of Political Signals: A Global VAR approach

Yinka S Hammed, Afees Salisu and Michael Akume

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate the influence of US quality of political signals (USQPOLS) on advanced and emerging markets using the Global Vector Autoregressive (GVAR) model that also accommodates the macroeconomic conditions of the shock recipient markets. We show an immediate negative impact on the equity markets with about 1.5% response to a 1 standard deviation shock due to the USQPOLS. However, we find impulse responses that transcend the immediate period for the high and low quality of political signals, albeit with contrasting evidence. Additional evidence involving Global Economic Policy Uncertainty (GEPU) suggests a direct and instantaneous effect on real equity prices. We are able to trace our evidence to the exchange rate channel and document important implications for policy and practice.

Keywords: Political signals; International Equity Markets; Global Vector Autoregressive Model; Impulse Responses (search for similar items in EconPapers)
JEL-codes: C32 G15 P00 (search for similar items in EconPapers)
Date: 2025-01-31
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