Economic Policy Uncertainty:Cross-Country Linkages and Spillover Effects on Economic Development in Some Belt and Road Countries

YUAN Jing, DONG Yajing, ZHAI Weijie, CAI Zongwu

Journal of Systems Science & Complexity ›› 2023, Vol. 36 ›› Issue (3) : 1169-1188.

PDF(509 KB)
PDF(509 KB)
Journal of Systems Science & Complexity ›› 2023, Vol. 36 ›› Issue (3) : 1169-1188. DOI: 10.1007/s11424-023-1060-0

Economic Policy Uncertainty:Cross-Country Linkages and Spillover Effects on Economic Development in Some Belt and Road Countries

  • YUAN Jing1, DONG Yajing1, ZHAI Weijie2, CAI Zongwu3
Author information +
History +

Abstract

With the increase of economic environment uncertainty, it is of great importance to study the linkage and spillover effects of economic policy uncertainty among countries. Especially, this article selects eight countries along the Belt and Road as the core countries (China, Korea, Croatia, India, Russia, Greece, Pakistan, and Singapore) and four countries (Germany, France, Japan, and UK) as the peripheral countries, and then copula technique and mixed-frequency global vector autoregressive model are employed to analyze the correlation and the spillover effect of the economic policy uncertainty (EPU) for the twelve selected countries, respectively. The proposed empirical findings show clearly that the EPU correlation among the eight core Belt and Road countries is stronger and the spillover effect of the core countries to the peripheral countries is statistically significant. As a result, for harmonious and win-win development, the Belt and Road countries should pay a close attention to the EPU, because the stability of the EPU promotes greatly the economy development.

Key words

Belt and road initiative / copula functions / economic policy uncertainty / global VAR / spillover effects

Cite this article

Download Citations
YUAN Jing , DONG Yajing , ZHAI Weijie , CAI Zongwu. Economic Policy Uncertainty:Cross-Country Linkages and Spillover Effects on Economic Development in Some Belt and Road Countries. Journal of Systems Science and Complexity, 2023, 36(3): 1169-1188 https://doi.org/10.1007/s11424-023-1060-0

References

[1] Aoyama R, One Belt, One Road:China's new global strategy, Journal of Contemporary East Asia Studies, 2016, 5(2):3-22.
[2] Huang Y P, Understanding China's Belt & Road initiative:Motivation, framework and assessment, China Economic Review, 2016, 40(1):314-321.
[3] Zhai F, China's belt and road initiative:A preliminary quantitative assessment, Journal of Asian Economics, 2018, 55(1):84-92.
[4] Du J L and Zhang Y F, Does One Belt One Road initiative promote Chinese overseas direct investment, China Economic Review, 2018, 47(1):189-205.
[5] Ullah S, Wang Z, Stokes P, et al., Risk perceptions and risk management approaches of Chinese overseas investors:An empirical investigation, Research in International Business and Finance, 2019, 47(1):470-486.
[6] Liu H Y, Islam M A, Khan M A, et al., Does financial deepening attract foreign direct investment? Fresh evidence from panel threshold analysis, Research in International Business and Finance, 2020, 53:101198.
[7] Bloom N, The impact of uncertainty shocks, Econometrica, 2009, 77(3):623-685.
[8] Caggiano G, Castelnuovo E, and Groshenny N, Uncertainty shocks and unemployment dynamics in US recessions, Journal of Monetary Economics, 2014, 67(1):78-92.
[9] Jurado K, Ludvigson S C, and Ng S, Measuring uncertainty, American Economic Review, 2015, 105(3):1177-1216.
[10] Gentzkow M and Shapiro J M, What drives media slant? Evidence from US daily newspapers, Econometrica, 2010, 78(1):35-71.
[11] Hoberg G and Phillips G, Product market synergies and competition in mergers and acquisitions:A text-based analysis, Review of Financial Studies, 2010, 23(10):3773-3811.
[12] Alexopoulos M and Cohen J, The power of print:Uncertainty shocks, markets, and the economy, International Review of Economics & Finance, 2015, 40(1):8-28.
[13] Baker S R, Bloom N, and Davis S J, Measuring economic policy uncertainty, Quarterly Journal of Economics, 2016, 131(4):1593-1636.
[14] Diebold F X and Yílmaz K, Better to give than to receive:Predictive directional measurement of volatility spillovers (with discussion), International Journal of Forecasting, 2012, 28(1):57-66.
[15] Cipollini A and Mikaliunaite I, Macro-uncertainty and financial stress spillovers in the Eurozone, Economic Modeling, 2020, 89(1):546-558.
[16] Greenwood-Nimmo M, Nguyen V H, and Shin Y, Measuring the connectedness of the global economy, International Journal of Forecasting, 2021, 37(2):899-919.
[17] Gao B, Li J J, Shi B Y, et al., Internal conflict and Bank liquidity creation:Evidence from the belt and Road initiative, Research in International Business and Finance, 2020, 53:101-227.
[18] Lemieux J and Peterson R A, Purchase deadline as a moderator of the effects of price uncertainty on search duration, Journal of Economic Psychology, 2011, 32(1):33-44.
[19] Jones P M and Olson E, The time-varying correlation between uncertainty, output, and inflation:Evidence from a DCC-GARCH model, Economics Letters, 2013, 118(1):33-37.
[20] Wang Y Z, Chen C R, and Huang Y S, Economic policy uncertainty and corporate investment:Evidence from China, Pacific-Basin Finance Journal, 2014, 26(1):227-243.
[21] Zhang G L, Han J L, Pan Z Y, et al., Economic policy uncertainty and capital structure choice:Evidence from China, Economic Systems, 2015, 39(3):439-457.
[22] Wang Y D, Zhang B, Diao X D, et al., Commodity price changes and the predictability of economic policy uncertainty, Economics Letters, 2015, 127(1):39-42.
[23] Li X M, Zhang B, and Gao R Z, Economic policy uncertainty shocks and stock-bond correlations:Evidence from the US market, Economics Letters, 2015, 132(1):91-96.
[24] Liu L and Zhang T, Economic policy uncertainty and stock market volatility, Finance Research Letters, 2015, 15(1):99-105.
[25] Scheffel E M, Accounting for the political uncertainty factor, Journal of Applied Econometrics, 2016, 31(6):1048-1064.
[26] Aastveit K, Natvik G J J, and Sola S, Economic uncertainty and the effectiveness of monetary policy, Journal of International Money and Finance, 2017, 76(1):50-67.
[27] Li X M and Peng L, US economic policy uncertainty and co-movements between Chinese and US stock markets, Economic Modelling, 2017, 61(1):27-39.
[28] Phan D H B, Sharma S S, and Tran V T, Can economic policy uncertainty predict stock returns? Global evidence, Journal of International Financial Markets, Institutions and Money, 2018, 55(1):134-150.
[29] Chiang T C, Economic policy uncertainty, risk and stock returns:Evidence from G7 stock markets, Finance Research Letters, 2019, 29:41-49.
[30] Balcilar M, Gupta R, Kim W J, et al., The role of economic policy uncertainties in predicting stock returns and their volatility for Hong Kong, Malaysia and South Korea, International Review of Economics & Finance, 2019, 59(1):150-163.
[31] Tiwari A K, Jana R K, and Roubaud D, The policy uncertainty and market volatility puzzle:Evidence from wavelet analysis, Finance Research Letters, 2019, 31(1):278-284.
[32] Chen X Y and Chiang T C, Empirical investigation of changes in policy uncertainty on stock returns-Evidence from China's market, Research in International Business and Finance, 2020, 53:101183.
[33] Li Z H and Zhong J H, Impact of economic policy uncertainty shocks on China's financial conditions, Finance Research Letters, 2020, 35:101303.
[34] Sklar A, Fonctions de ré partition à n dimensions et leures marges, Publications de L'Institut de Statistique de L'Université de Paris, 1959, 8(1):229-231.
[35] Cherubini U, Luciano E, and Vechiato W, Copula Methods in Finance, John Wiley & Sons, New York, 2004.
[36] Cai Z W and Wang X, Selection of mixed copula model via penalized likelihood, Journal of the American Statistical Association, 2014, 109(506):788-801.
[37] Patton A J, Modeling asymmetric exchange rate dependence, International Economic Review, 2006, 47(2):527-556
[38] Yang B D, Cai Z W, Hafner C M, et al., Time-varying mixture copula models with copula selection, Statistica Sinica, 2022, 32(4):1049-1077.
[39] Liu G N, Long W, Yang B D, et al., Semiparametric estimation and model selection for conditional mixture copula models, Scandinavia Journal of Statistics, 2022, 49(1):287-330.
[40] Pesaran H, Schuermann T, and Weiner S M, Modeling regional interdependencies using A global error-correcting macroeconometric model, Journal of Business and Economic Statistics, 2004, 22(2):129-162.

Funding

This research was supported by the National Natural Science Foundation of China under Grant Nos. 71631004, 72033008 and the Humanity and Social Science Foundation of Ministry of Education of China under Grant No. 18YJA790101.
PDF(509 KB)

166

Accesses

0

Citation

Detail

Sections
Recommended

/