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Impact of economic policy uncertainty shocks on China's financial conditions

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  • Li, Zhenghui
  • Zhong, Junhao

Abstract

This study explores the effect of global economic policy uncertainty (EPU) shocks on China's financial conditions index (CFCI) and analyzes the sources of uncertainty shocks. The results of the spillover index showed that the spillover effects of global EPU on CFCI were concentrated in the crisis periods, but mostly insignificant effect in the normal periods. The uncertainty shocks emanating from China itself were the major sources of China's financial markets volatility and the US EPU appeared to be the most significant exogenous cause of the fall of CFCI. The source of long-term uncertainty shocks changed over time.

Suggested Citation

  • Li, Zhenghui & Zhong, Junhao, 2020. "Impact of economic policy uncertainty shocks on China's financial conditions," Finance Research Letters, Elsevier, vol. 35(C).
    • Handle: RePEc:eee:finlet:v:35:y:2020:i:c:s1544612319306841
    DOI: 10.1016/j.frl.2019.101303
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    More about this item

    Keywords

    Economic policy uncertainty; China's financial conditions index; Spillover effect; Uncertainty shock;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

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