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

Author

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  • Mikhail Stolbov

    (Moscow State Institute of International Relations)

  • Alexander Karminsky

    (National Research University Higher School of Economics)

  • Maria Shchepeleva

    (National Research University Higher School of Economics)

Abstract

We study the relationship between economic policy uncertainty and systemic risk for nine European countries in January 2010–September 2016 by applying conventional Granger causality tests and advanced techniques (wavelet analysis and Bayesian VARs). The country-level analyses show that the lead-lag patterns vary considerably in the short and longer run as well as at different frequencies. Nonetheless, the pivotal role of uncertainty tends to strengthen over longer time horizons (at lower frequencies) and in the BVAR framework. This is true for financially fragile economies such as Ireland, Italy, Russia, Spain. A panel BVAR model confirms this finding for the whole sample.

Suggested Citation

  • Mikhail Stolbov & Alexander Karminsky & Maria Shchepeleva, 2018. "Does Economic Policy Uncertainty Lead Systemic Risk? A Comparative Analysis of Selected European Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(3), pages 332-360, September.
    • Handle: RePEc:pal:compes:v:60:y:2018:i:3:d:10.1057_s41294-018-0065-5
    DOI: 10.1057/s41294-018-0065-5
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    More about this item

    Keywords

    Bayesian VAR; Dynamic factor model; Economic policy uncertainty; Systemic risk; Wavelet coherence;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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