{"title":"Exploring the relationship between China's economic policy uncertainty and business cycles: Exogenous impulse or endogenous responses?","authors":"Li Yujia , Zhu Zixiang , Che Ming","doi":"10.1016/j.ememar.2023.101090","DOIUrl":null,"url":null,"abstract":"<div><p><span>This paper explores China's endogeneity of economic policy uncertainty (EPU). Previous studies have disagreed on the causal relationship between uncertainty and the business cycle. By using shock-based restrictions, we identify structural shocks and investigate the endogeneity of China's EPU index. The findings suggest that an increase in EPUs is more likely to cause fluctuations in the Chinese economy than the reverse. The paper also uncovers </span>spillovers of China's EPU on the US EPU, indicating a national strategy at play. In the long run, EPU shocks in China account for at least 22% of China's economic activity variation and 30% of the US EPU variation. These findings remain consistent when accounting for the COVID-19 period, adopting heteroskedasticity identification schemes, and using alternative EPU indexes.</p></div>","PeriodicalId":47886,"journal":{"name":"Emerging Markets Review","volume":null,"pages":null},"PeriodicalIF":5.6000,"publicationDate":"2023-12-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Emerging Markets Review","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S156601412300095X","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper explores China's endogeneity of economic policy uncertainty (EPU). Previous studies have disagreed on the causal relationship between uncertainty and the business cycle. By using shock-based restrictions, we identify structural shocks and investigate the endogeneity of China's EPU index. The findings suggest that an increase in EPUs is more likely to cause fluctuations in the Chinese economy than the reverse. The paper also uncovers spillovers of China's EPU on the US EPU, indicating a national strategy at play. In the long run, EPU shocks in China account for at least 22% of China's economic activity variation and 30% of the US EPU variation. These findings remain consistent when accounting for the COVID-19 period, adopting heteroskedasticity identification schemes, and using alternative EPU indexes.
期刊介绍:
The intent of the editors is to consolidate Emerging Markets Review as the premier vehicle for publishing high impact empirical and theoretical studies in emerging markets finance. Preference will be given to comparative studies that take global and regional perspectives, detailed single country studies that address critical policy issues and have significant global and regional implications, and papers that address the interactions of national and international financial architecture. We especially welcome papers that take institutional as well as financial perspectives.