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Economic policy uncertainty, macroeconomic shocks, and systemic risk: Evidence from China

Author

Listed:
  • Yang, Xite
  • Zhang, Qin
  • Liu, Haiyue
  • Liu, Zihan
  • Tao, Qiufan
  • Lai, Yongzeng
  • Huang, Linya

Abstract

This paper used DCC-GARCH to construct systemic risk indicators and principal component analysis to construct macroeconomic shock indicators to analyze the monthly data from January 2007 to June 2022 of 45 financial institutions registered in China. The TVP-VAR-SV model was then used to empirically examine the relationships between economic policy uncertainty, macroeconomic shocks, and systemic financial risks. It was found that there were apparent time-varying relationships between economic policy uncertainty (EPU), macroeconomic shocks (MS), and systemic financial risk (SYS). Further research showed differences in the direction and degree of the interactions between the variables under different time shock backgrounds.

Suggested Citation

  • Yang, Xite & Zhang, Qin & Liu, Haiyue & Liu, Zihan & Tao, Qiufan & Lai, Yongzeng & Huang, Linya, 2024. "Economic policy uncertainty, macroeconomic shocks, and systemic risk: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    • Handle: RePEc:eee:ecofin:v:69:y:2024:i:pa:s1062940823001559
    DOI: 10.1016/j.najef.2023.102032
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    More about this item

    Keywords

    Economic policy uncertainty; Macroeconomic shocks; Systemic risk; TVP-VAR-SV model;
    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
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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