Does Economic Policy Uncertainty Lead Systemic Risk? A Comparative Analysis of Selected European Countries

Stolbov, Mikhail; Karminsky, Alexander; Shchepeleva, Maria

doi:10.1057/s41294-018-0065-5

Cited by 15 publications

(8 citation statements)

References 42 publications

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“…As for the relationship between economic policy uncertainty and financial stress, such evidence is only found for EPUGLOB leading CLIFS at the 10th quantile in case of Sweden. The finding is partly consistent with Stolbov, Karminsky, and Shchepeleva (2018). On the one hand, both studies find no relationship between economic policy uncertainty and financial stress for major European economies (Germany, the UK, France), while dissecting its signs for Sweden.…”

Section: Country‐level Resultssupporting

confidence: 89%

“…On the one hand, both studies find no relationship between economic policy uncertainty and financial stress for major European economies (Germany, the UK, France), while dissecting its signs for Sweden. On the other hand, Stolbov et al (2018) underscore the adverse effect of economic policy uncertainty on financial stress for financially fragile EU economies, for example, Italy, Spain and Ireland, which is not corroborated in our country‐level analysis.…”

Section: Country‐level Resultscontrasting

confidence: 88%

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Macrofinancial linkages in Europe: Evidence from quantile local projections

Stolbov

Shchepeleva

2020

Int. J Fin Econ

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The paper investigates macrofinancial linkages in the sample of 16 European economies over January 1997–December 2019 from a new twofold perspective. First, we put a particular emphasis on the role of news‐based sentiment measures in these relationships, that is, economic policy uncertainty and global geopolitical risk. Second, we pursue a hybrid econometric approach to capture a presumably nonlinear nature of these linkages by building on different quantiles of the data series and estimating impulse responses from smooth local projections (Barnichon and Brownlees, Review of Economics and Statistics, 101(3), 522–530, 2019). Our results legitimize such approach as the number of statistically significant impulse responses based on this approach is skewed towards upper (75th and 90th) quantiles. We find that global economic policy uncertainty index dampens the growth rates of industrial production in Austria, France, Italy, Luxembourg and Slovakia, which calls for specific measures to mitigate this adverse effect at the national level, for example, by curtailing yellow journalism, populist ideas and disbeliefs. However, there is only minor evidence for the relationship running between economic policy uncertainty and financial stress. Global geopolitical risk appears irrelevant in the country‐ and panel‐level analyses. Meanwhile, the VIX index performs a pervasive role in undermining industrial production and increasing economic policy uncertainty in Europe.

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Section: Country‐level Resultssupporting

confidence: 89%

Section: Country‐level Resultscontrasting

confidence: 88%

Macrofinancial linkages in Europe: Evidence from quantile local projections

Stolbov

Shchepeleva

2020

Int. J Fin Econ

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“…Both measure the displacement of a periodic component relative to an origin in the time domain (Schmidbauer et al, 2017;Bales, 2022). An absolute value less (higher) than π/2 indicates that the two time series move in-phase (anti-phase), stating that both change in the same (different) direction (Stolbov et al, 2018;Schmidbauer et al, 2017). The lead-lag patterns can be illustrated with arrows in cross-wavelet heat maps.…”

Section: Cross-wavelet Transformmentioning

confidence: 99%

Pandemic waves, government response, and bank stock returns: evidence from 36 countries

Bales

Burghof

2022

FREP

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PurposeThe paper examines the impact of COVID-19 on bank stock returns over various time scales and frequencies for 36 countries. Moreover, the authors look at the governments' responses to the corona crisis and examine its impact on bank stock returns.Design/methodology/approachThe paper applies continuous wavelet transformation to obtain robust estimates of the co-movement (coherency) between confirmed cases and bank stock returns over time and at different time scales. Furthermore, the authors apply fixed effects panel regression to examine the response of bank stocks to domestic COVID-19 policies.FindingsThe results indicate that the number of confirmed COVID-19 cases negatively impacts bank stock returns during different waves of the pandemic in the medium-run. However, there is only little dependence in the very short-run. Moreover, bank stock returns positively react to domestic COVID-19 polices. This demonstrates that governmental interventions not only reduce the spread of COVID-19 but are also able to thereby calm financial markets.Originality/valueThe application of wavelet methods to the field of economics and finance is relatively recent and allows the distinction between short-term and long-term effects. Standard econometric methods, in contrast, only operate within the time domain. This paper combines wavelet methods with conventional econometrics to answer the research question.

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“…This is the gap we intend to cover, by using the EPU and Trade Policy Uncertainty index (Baker et al (2016)) which covers business and economics news published in the Hong-Kong based South China Morning Post. It can serve as an indicator of public sentiment which represents qualitative rather than quantitative shifts (Stolbov et al (2018)) and international investors are expected to be more attuned to it.…”

Section: Economic Policy Uncertainty In Chinamentioning

confidence: 99%

Systemic Risk in the Chinese Banking Sector

Chondrogiannis

Nivorozhkin

2020

SSRN Journal

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We examine the evolution and factors of systemic risk in the Chinese banking sector over the last decade from the perspective of international investors. We apply the SRISK measure of systemic risk to a representative sample of listed Chinese institutions that captures 50-60% of total banking assets and utilize the Granger-causality network-based approach to demonstrate interlinkages among Chinese banks beyond the largest financial institutions.Firstly, we show a dramatic increase in systemic risk after 2011 and the increased contribution of small-and medium-sized banks. Then, we identify causality relationships from housing prices, economic policy uncertainty and shadow banking towards systemic risk and causality from shadow banking to housing prices. According to our results, international concerns about the stability of the Chinese banking system are well justified and a systemic event with international impact could be caused by distress in a Chinese financial institution outside of the group of the largest banks.

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Does Economic Policy Uncertainty Lead Systemic Risk? A Comparative Analysis of Selected European Countries

Cited by 15 publications

References 42 publications

Macrofinancial linkages in Europe: Evidence from quantile local projections

Macrofinancial linkages in Europe: Evidence from quantile local projections

Pandemic waves, government response, and bank stock returns: evidence from 36 countries

Systemic Risk in the Chinese Banking Sector

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