Economic policy uncertainty, investor sentiment and systemic financial risk: Evidence from China

IF 3.8 3区经济学 Q1 BUSINESS, FINANCE

North American Journal of Economics and Finance Pub Date : 2025-01-01 DOI:10.1016/j.najef.2024.102356

Guobin Fang , Xuehua Zhou , Huimin Ma , XiaoFang Zhao , YaoXun Deng , Luoyan Xie

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引用次数: 0

Abstract

Based on the construction of systemic financial risk metrics using the TVP-FAVAR model, this paper explores the dynamic evolutionary relationship between economic policy uncertainty (EPU), different dimensions of investor sentiment and systemic financial risk using the TVP-SV-VAR model. It also examines the cross-market contagion mechanism of systemic financial risk under EPU shocks and the role of investor sentiment in it from two dimensions: financial market and economic fundamentals. The study finds that (1) the short- and medium-term effects of EPU on systemic financial risk are more stable and significant than the long-term effects. (2) Micro investor sentiment has the strongest shock effect on systemic financial risk. (3) There are differences in the timing and extent of direct shocks to EPU across financial sub-markets and economic sectors, and risk contagion effects among each other and indirect shocks from investor sentiment further increase the level of systemic financial risk. This study is of great significance for coping with EPU and investor sentiment shocks and preventing and resolving systemic financial risks.

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来源期刊

North American Journal of Economics and Finance Multiple-

CiteScore

7.30

自引率

8.30%

发文量

168

期刊介绍： The focus of the North-American Journal of Economics and Finance is on the economics of integration of goods, services, financial markets, at both regional and global levels with the role of economic policy in that process playing an important role. Both theoretical and empirical papers are welcome. Empirical and policy-related papers that rely on data and the experiences of countries outside North America are also welcome. Papers should offer concrete lessons about the ongoing process of globalization, or policy implications about how governments, domestic or international institutions, can improve the coordination of their activities. Empirical analysis should be capable of replication. Authors of accepted papers will be encouraged to supply data and computer programs.