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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 - Laboratoire « Lieux, Identités, eSpaces, Activités » (UMR CNRS 6240 LISA) - CNRS - Centre National de la Recherche Scientifique - Università di Corsica Pasquale Paoli [Université de Corse Pascal Paoli], CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion, LISA (UMR_7583) - Laboratoire Interuniversitaire des Systèmes Atmosphériques - INSU - CNRS - Institut national des sciences de l'Univers - UPD7 - Université Paris Diderot - Paris 7 - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - CNRS - Centre National de la Recherche Scientifique)

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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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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