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Foreign policy uncertainty shocks and US macroeconomic activity: Evidence from China

Author

Listed:
  • Idriss Fontaine

    (CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique)

  • Laurent Didier

    (CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique)

  • Justinien Razafindravaosolonirina

    (LISA - Lieux, Identités, eSpaces, Activités - UPP - Université Pascal Paoli - CNRS - Centre National de la Recherche Scientifique, CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion)

Abstract

This paper investigates the spillover effects of economic policy uncertainty (EPU) from China on US real macroeconomic variables in both expansion and recession periods. We use monthly data and estimate a Smooth Transition VAR (STVAR) model over the recent period. We find robust evidence that Chinese uncertainty significantly affects US economic activity during busts while no effect is perceptible during booms. The results also underline that Chinese EPU is a determinant of policy uncertainty, unemployment and industrial production in US.

Suggested Citation

  • Idriss Fontaine & Laurent Didier & Justinien Razafindravaosolonirina, 2017. "Foreign policy uncertainty shocks and US macroeconomic activity: Evidence from China," Post-Print hal-03571723, HAL.
    • Handle: RePEc:hal:journl:hal-03571723
    DOI: 10.1016/j.econlet.2017.03.034
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    Citations

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    Cited by:

    1. Huang, Yun & Luk, Paul, 2020. "Measuring economic policy uncertainty in China," China Economic Review, Elsevier, vol. 59(C).
    2. Huang, Ying Sophie & Wu, Jiajia & Guo, Feng, 2022. "Venture capital staging under economic policy uncertainty," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 572-596.
    3. Aguilar, Pablo & Ghirelli, Corinna & Pacce, Matías & Urtasun, Alberto, 2021. "Can news help measure economic sentiment? An application in COVID-19 times," Economics Letters, Elsevier, vol. 199(C).
    4. Canh Phuc Nguyen & Thanh Dinh Su, 2022. "When ‘uncertainty’ becomes ‘unknown’: Influences of economic uncertainty on the shadow economy," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(3), pages 677-716, September.
    5. Li, Zhenghui & Zhong, Junhao, 2020. "Impact of economic policy uncertainty shocks on China's financial conditions," Finance Research Letters, Elsevier, vol. 35(C).
    6. Josué Diwambuena & Jean-Paul K. Tsasa, 2021. "The Real Effects of Uncertainty Shocks: New Evidence from Linear and Nonlinear SVAR Models," BEMPS - Bozen Economics & Management Paper Series BEMPS87, Faculty of Economics and Management at the Free University of Bozen.
    7. Lee, Kiryoung & Jeon, Yoontae & Jo, Chanik, 2020. "Chinese economic policy uncertainty and U.S. households' portfolio decisions," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    8. Nguyen, Canh Phuc, 2022. "Uncertainty and gender inequality: A global investigation," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 31-47.
    9. Huang, Zhuo & Tong, Chen & Qiu, Han & Shen, Yan, 2018. "The spillover of macroeconomic uncertainty between the U.S. and China," Economics Letters, Elsevier, vol. 171(C), pages 123-127.
    10. Lee, Kiryoung & Jeon, Yoontae, 2020. "Measuring Chinese consumers’ perceived uncertainty," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 51-70.
    11. Lee, Kiryoung & Jeon, Yoontae & Nam, Eun-Young, 2021. "Chinese Economic Policy Uncertainty and the Cross-Section of U.S. Asset Returns," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 1063-1077.
    12. Dogah, Kingsley E., 2021. "Effect of trade and economic policy uncertainties on regional systemic risk: Evidence from ASEAN," Economic Modelling, Elsevier, vol. 104(C).
    13. Yi‐Ting Peng & Tsangyao Chang & Omid Ranjbar, 2022. "Analyzing the degree of persistence of economic policy uncertainty using linear and non‐linear fourier quantile unit root tests," Manchester School, University of Manchester, vol. 90(4), pages 453-471, July.
    14. Cagli, Efe Caglar & Mandaci, Pinar Evrim, 2023. "Time and frequency connectedness of uncertainties in cryptocurrency, stock, currency, energy, and precious metals markets," Emerging Markets Review, Elsevier, vol. 55(C).
    15. Wannakomol Supachart, 2019. "The Economic Policy Uncertainty in China, the United States, and Europe: The Empirical Impact on Chinese Stock Markets," Applied Economics and Finance, Redfame publishing, vol. 6(5), pages 131-144, September.
    16. Tangyong Liu & Xu Gong & Lizhi Tang, 2022. "The uncertainty spillovers of China's economic policy: Evidence from time and frequency domains," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4541-4555, October.
    17. Yuee Li & Jingdong Li, 2021. "How Does China’s Economic Policy Uncertainty Affect the Sustainability of Its Net Grain Imports?," Sustainability, MDPI, vol. 13(12), pages 1-21, June.
    18. Ömer YALÇINKAYA & Ali Kemal ÇELİK, 2021. "The Impact of Global Uncertainties on Economic Growth: Evidence from the US Economy (1996: Q1-2018: Q4)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 35-54, June.
    19. Zhang, Dayong & Lei, Lei & Ji, Qiang & Kutan, Ali M., 2019. "Economic policy uncertainty in the US and China and their impact on the global markets," Economic Modelling, Elsevier, vol. 79(C), pages 47-56.
    20. Yaming Ma & Ziwei Wang & Feng He, 2022. "How do economic policy uncertainties affect stock market volatility? Evidence from G7 countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2303-2325, April.

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