Dynamics of international spillovers and interaction: Evidence from financial market stress and economic policy uncertainty

Cross-Category, Trans-Pacific Spillovers of Policy Uncertainty and Financial Market Volatility

“…Second, there is previous research on international EPU spillovers. Klößner and Sekkel (2014), for example, find significant spillovers between overall EPU indices for the US, Canada and several European economies, while Yin and Han (2014), Balli et al (2017) and Liow et al (2018) obtain similar results for broader sets of countries, including Japan. 4 Colombo (2013), , and Clausen et al (forthcoming) do not exclusively focus on cross-country EPU spillovers, but nonetheless also document their significance.…”

“…Liow et al (2018) also investigate the link between a cross-country EPU spillover index and a cross-financial market volatility spillover index they compute and find weak evidence for the former leading the latter. However, since their framework does not allow for direct EPU-volatility spillovers, they are only looking at third-round spillovers at best, and at generally biased results at worst.5 Other examples of studies on the link between EPU and FX volatility areKrol (2014) andKido (2016).…”

The Casual Relationship between China’s Financial Stress and Economic Policy Uncertainty: A Bootstrap Rolling-Window Approach

“…Afterwards, Sun et al (2017) re-examine the relationship between EPU and FS from the multi-scales perspective in U.S., and they find that the long-run trends of EPU and FS are highly correlated with each other, while the correlation of the two variables for short-run fluctuates drastically [19]. In addition, Liow et al (2018) pay their attention to investigating dynamics between EPU and FS in the multi-country context and they find that EPU spillovers lead FS spillovers across seven countries [20]. Overall, the existed studies have made contributions to the research of the relationship between EPU and FS.…”

Macro-uncertainty and financial stress spillovers in the Eurozone

“…We dier from the previous literature by focusing on uncertainty proxies, rather than real economic indicators. To the best of our knowledge, the paper by Liow et al (2018) is the only study (based on a common frequency VAR) to derive the Diebold and Yilmaz indices of total and directional connectedness among economic policy uncertainty (measured by the EPU index) and nancial stress arising not only in the stock market, but also in the real estate, bond and currency markets of seven major world economies. 4 However, instead of relying on the economic policy uncertainty (EPU index), we use GDP growth uncertainty index.…”