No abstract

The purpose of this paper is to examine non‐linear and cointegrating relationships between monetary policy uncertainty, investor sentiment, and stock market for the US economy, via controlling for potential macroeconomic risk factors. We mainly utilize non‐linear autoregressive distributed lag (NARDL) approach and findings support an existing cointegration between the aforementioned variables. Our results also suggest that there is a bidirectional and negative relationship between US stock market performance and monetary policy uncertainty in the short‐run. Furthermore, the effect of monetary policy uncertainty on investor sentiment is significantly negative and not strongly asymmetric in the long‐run. On the other hand, in the short‐run, increasing investor sensitivity to macroeconomic shocks strongly increases monetary policy uncertainty, while reducing sensitivity does not have a significant impact on the monetary policy uncertainty. Finally, we find a positive and bi‐directional relationship between stock prices and investor sentiment both in the short‐ and long‐run. In the long‐run, decreasing investor sensitivity to macroeconomic fluctuations (becoming more optimistic) has a greater positive influence on stock prices than a negative influence on stock prices, since investors are becoming more pessimistic. Implications from our analysis are important to policy makers and investors for determining effective economic policy decisions and proper investment strategies.

No abstract

No abstract

In this paper, we investigate if negative effect of geopolitical risk on economic growth reduces with the financial structure of emerging economies. Although previous studies do not find market-based structure to boost economic growth, we cast a light upon why countries still opt for shifting to that structure. We mainly utilize panel autoregressive distributed lag (ARDL) for the period between 1985 and 2021 and employ country-based geopolitical risk (GPR) indices for 15 emerging markets. Findings depict that market-based structure reduces negative impact of geopolitical risk on economic growth, which might be attributed to increasing transparency and hence investors feeling less hesitant in investing market-based economies. On the other hand, we also show that market-based system reduces the adverse effects of GPR on consumption, whereas bank-based system has the same effect on investment growth in the long-run. Therefore, our paper asserts that the financial system is not irrelevant in terms of growth perspective, if the geopolitical risk is a key factor for an emerging country.