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Causality between Economic Policy Uncertainty, Economic Growth and Stock Liquidity: Evidence from ASEAN markets

Author

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  • Tran Phuoc

    (Ho Chi Minh City University of Industry and Trade, Ho Chi Minh City, Vietnam.)

  • Huy Tam Phan

    (University of Economics and Law, Ho Chi Minh City, Vietnam and Vietnam National University, Ho Chi Minh City, Vietnam.)

  • Hong Tuyet Pham

    (University of Economics and Law, Ho Chi Minh City, Vietnam and Vietnam National University, Ho Chi Minh City, Vietnam.)

Abstract

This research investigates the causal relationships among economic policy uncertainty, economic growth, and stock market liquidity in ASEAN markets, focusing on the extent and directionality of these relationships. Using Granger causality tests on data from six ASEAN countries, the study assesses the impact of economic policy uncertainty on economic growth and stock market liquidity using price-range and volume-based measures. The findings reveal no significant causal effect of economic policy uncertainty on economic growth or stock market liquidity but identify significant causal effects of economic growth on stock market liquidity for price-range measures and of stock market liquidity on economic policy uncertainty. This underscores the complex interplay within emerging markets and suggests resilience against policy uncertainty. Recommendations emphasize the need for investors and policymakers to consider broader economic indicators and market-specific liquidity measures when evaluating the impact of economic policy uncertainty, advocating for diversified strategies and policies to stabilize economic growth to enhance market liquidity indirectly.

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Handle: RePEc:vrs:wsbjbf:v:58:y:2024:i:1:p:133-150:n:1013
DOI: 10.2478/wsbjbf-2024-0013
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