Economic Policy Uncertainty Linkages among Asian Countries: Evidence from Threshold Cointegration Approach

Osei, Prince Mensah; Djimatey, Reginald; Adam, Anokye M.

doi:10.1155/2021/6656176

Cited by 7 publications

(7 citation statements)

References 76 publications

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“…However, GEPU lags for India, but has a potential to lead or lag for Russia and China in the medium-term. This outcome contributes to the findings of Osei et al [ 106 ] that EPU from China responds quickly to a rise in value of other ASIAN countries’ EPU indices, which may require possible policy uncertainty synergies and spillovers among the Asian economies. Despite the result of this study, Carré and L’œillet [ 107 ] in their review indicated that the nexus between finance-growth nexus is inconclusive.…”

Section: Conclusion and Policy Implicationsupporting

confidence: 76%

Financial sector and economic growth amid external uncertainty shocks: Insights into emerging economies

et al. 2021

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The study aims to shed new lights on the lead-lag relationships between the financial sector (RFSI) and economic growth (GDP) in the midst of global economic policy uncertainty (GEPU) shocks for BRICS economies. Hence, the bivariate, partial, and wavelet multiple correlations techniques are employed. From the bivariate analysis, we document positive bi-directional causality between the RFSI and economic growth over the sample period. The partial wavelet reveals that GEPU shocks distort the significance and directional comovements between the RFSI and GDP. Moreover, the outcome from the wavelet multiple cross correlations (WMCC) indicates that the RFSI is a first mover at most time scales for the BRICS economies. This is followed by GEPU which either leads or lags for most scales, especially for South Africa. The impact of GEPU on RFSI and GDP is worst for South Africa in about four cases in the medium-, and long-terms. This signifies that South Africa’s financial markets and economic growth are vulnerable to GEPU. However, the impetus for GEPU to drive the comovements between the financial sector and economic activity was less pronounced in the pre-COVID analysis conducted with the WMCC. The study supports both the supply-leading and demand-following hypotheses. Our findings also underscore the need for policymakers, investors and academics alike to incessantly observe the dynamics between finance and growth across time and periodicity while considering adverse shocks from global economic policy uncertainty in tandem.

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Section: Conclusion and Policy Implicationsupporting

confidence: 76%

Financial sector and economic growth amid external uncertainty shocks: Insights into emerging economies

et al. 2021

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“…e adverse long-term influence of GEPU on stock markets is not far from the results obtained by prior empirical studies [46,91]. It is not startling to find that GEPU adversely impact on stock returns of China and India because Osei et al [92] made it clear that EPU from China and India respond quickly to a rise in value of other ASIAN countries' EPU indices, which may require possible policy uncertainty synergies and spillovers among the Asian countries. We advocate that stock markets of BRICS economies are vulnerable to external shocks and uncertainty in the long-term perspective which is contrary to the findings of Hung et al [51,93].…”

Section: Discussionmentioning

confidence: 87%

A CEEMDAN‐Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS

et al. 2022

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We model a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between four macroeconomic variables (exchange rate, GDP, global economic policy uncertainty, and relative CPI) and stock returns of BRICS economies in the frequency-domain using the information flow theory. The Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (CEEMDAN)-based Rényi effective transfer entropy approach is used to establish dynamic flow of information between macroeconomic variables and stock returns of BRICS. The original return series suggested insignificant information flow between most macroeconomic variables and stock returns. However, we reveal both asymmetric and tail dependent analyses at diverse scales between macroeconomic variables and stock returns of BRICS economies. Moreover, we find negative significant flow of information between the variables, in that knowing the history of one variable (either stock or macroeconomic variable), in this case, indicates considerably more uncertainty than knowing the history of only the other variable (either stock or macroeconomic variable). We also observe that global economic policy uncertainty has the most significant adverse causal relationship with stock returns of BRICS, especially in the long term. These results have important implications that investors and policymakers should take into account. Regulators should consider instituting sound policy actions geared towards minimising long-term effects of external shocks and uncertainties.

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“…An attempt has been made in several studies to capture the relevance of EPU across domestic and global economies (Bai et al 2019;Akadiri et al 2020;Abakah et al 2021;Osei et al 2021;Yang et al 2021;Zhou et al 2022). For instance, in the recent study by Zhou et al (2022), the spillover effects, the dynamic characteristics of the EPU spillover network, and the corresponding impact of the coronavirus (COVID-19) pandemic on these spillover effects across 19 countries were investigated.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Moreover, without evidence of a significant impact on net spillovers, COVID-19 deaths and new infection cases exert a statistically significant effect on transmission and reception directional EPU spillovers. Like Zhou et al (2022), with the complex network analysis, the effects of EPU have been linked to market systems across global economies, including the Asia-Pacific region (Osei et al 2021;Yang et al 2021), and the selected developed economies (Abakah et al 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Moreover, empirical approaches have also varied in establishing the link between the countries' EPUs. For instance, cointegration and Granger causality approaches were adopted by Osei et al (2021) in establishing the long-and short-run asymmetric dynamism between the EPU of China-India, China-Japan, China-Korea, India-Japan, India-Korea, and Japan-Korea during the period from January 1997 to April 2020. Furthermore, in Tiwari et al (2021), network analysis from the graph-theory framework was adopted in examining the link between the developed countries' economic and financial uncertainties.…”

Section: Literature Reviewmentioning

confidence: 99%

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Evaluating the Hierarchical Contagion of Economic Policy Uncertainty among the Leading Developed and Developing Economies

2023

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An array of global events, including the global financial crisis, natural disasters, and the recent coronavirus pandemic, have consistently shown the vulnerability of global systems and humans to externally undesirable contagions. In order to further provide alternative approaches to information valuation, this study utilized the economic policy uncertainty (EPU) of 21 leading developed and developing economies (Australia, Brazil, Canada, Chile, China, Colombia, Denmark, France, Germany, Greece, India, Ireland, Italy, Japan, Korea, Netherlands, Russia, Spain, Sweden, the United Kingdom, and the United States of America) over the period January 1997 to May 2021. The information theory reveals the hierarchy of degrees of randomness in the EPU indices; it shows the information flow among the EPU indices through the mutual information metric and the graphical illustration of the information flows using network theory. Importantly, the Entropy measures indicate higher predictability of the Netherlands and Ireland’s EPU indices, suggesting that they have less randomness than other indices. Contrarily, Greece and the United Kingdom share the lowest predictability of the EPU indices. Moreover, the complex networks analysis shows that the EPU indices is generally shaped by geographic location. In order of significance, the United States of America’s EPU index exhibits the strongest correlation with other countries’ EPU indices and followed by the EPU indices of France, the United Kingdom (UK), and Germany. In general, the result of the investigation communicates relevant policy measures that potentially ameliorate shocks from external contagions.

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Economic Policy Uncertainty Linkages among Asian Countries: Evidence from Threshold Cointegration Approach

Cited by 7 publications

References 76 publications

Financial sector and economic growth amid external uncertainty shocks: Insights into emerging economies

Financial sector and economic growth amid external uncertainty shocks: Insights into emerging economies

A CEEMDAN‐Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS

Evaluating the Hierarchical Contagion of Economic Policy Uncertainty among the Leading Developed and Developing Economies

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