The USA–China trade policy uncertainty and inference for the major global south indexes

Abstract

PurposeThe recent dynamics of trade policy, especially that is associated with the United States of America (USA) and China, has not only triggered policy adjustments in two economies, it has also implied an uncertainty spillover to other economies across the globe. Consequently, the current study attempts to examine the effect of uncertainties in the USA–China trade policies on stock market indexes. In addition, the cointegration evidence between the USA–China trade policy uncertainty index and of the leading Global South fragile quintet (Brazil, Indonesia, South Africa, India and Turkey) stock market indices is investigated.Design/methodology/approachMainly, the FMOLS and DOLS Granger causality analysis with cointegration coefficient estimators were employed for the dataset over the monthly data period of March 2003 and July 2019.FindingsAccordingly, the study found a long-term relationship between the USA–China Trade Policy Uncertainty index and the stock exchange indexes. In addition, a causal relationship was established from the change in the USA–China Trade Policy Uncertainty index to the change in the stock market indexes of almost all of the examined countries (Brazil, Indonesia, South Africa, India and Turkey). In addition, the nonlinear Autoregressive Distributed Lag approach further offers evidence of asymmetric relationship among the examined indicators.Originality/valueMoreover, this study contributed to the existing literature because it employed the indexes of BIST100, BOVESPA, BSE Sensex 30, IDX Composite and South Africa 40 in a novel approach. Thus, the study posited a useful policy guideline for associated economic uncertainties arising from the trade dispute, such as the case of the world’s two largest trading giants or partners (i.e. the USA and China).

Is stock market in Sub-Saharan Africa resilient to health shocks?

“…These results are consistent with recent studies that documented similar findings (Babarinde, 2020; Onali, 2020), who found that the performance of stock markets in the US and other COVID-19 highly ravaged economies were not impacted by movements in the number of cases and fatalities in the first three months of 2020, except for the log of a number of documented cases in China. However, these results are inconsistent with other recent studies that validated the significant sensitivity of the stock market to the novel coronavirus (Abu et al , 2021; Ashraf, 2020; Takyi and Bentum-Ennin, 2020; Goodell, 2020; Sharif et al , 2020; Salisu et al , 2020; Akdag et al , 2021; Kumeka et al , 2021; Raifu et al , 2021). For example, Takyi and Bentum-Ennin (2020) reported that following the incidence of Coronavirus, the performance of stock markets in Africa dropped by around negative 2.7% to 21%.…”

“…For example, Takyi and Bentum-Ennin (2020) reported that following the incidence of Coronavirus, the performance of stock markets in Africa dropped by around negative 2.7% to 21%. And Akdag et al (2021) also documented that the USA -China trade war significantly influenced the stock market indices of the sampled economies.…”

“…Implying that in periods of uncertainty such as the ongoing COVID-19 outbreak, stock markets such as those of Ghana and Tanzania provide prospective benefits for investors to diversify. In another study on trade war, Akdag et al (2021) investigated the spillover implications of the US-China trade hostilities on the economies of Brazil, India, Indonesia, South Africa and Turkey. By autoregressive distributed lags, fully modified ordinary least squares and dynamic ordinary least squares Granger causality from March 2003 to July 2019 period, they concluded that the trade hostilities between the USA and China affected the stock market indexes of the sampled economies [5].…”

Is there a price bubble in the exchange rates of the developing countries? The case of BRICS and Turkey

“…Just like the production of essential goods and services are subject to human needs, the prices of essential commodities are largely associated with the dynamics of their supply and demand. İn essence, the availability and/or prices of the essential goods and services are associated with the dynamics related to economic uncertainties, natural events or disasters and market-related factors (Balcilar et al ., 2016; Alola et al ., 2019; Akadiri et al ., 2020; Onifade et al ., 2020; Akdag et al ., 2021). Moreover, the monetary policies applied to one of the currency pairs or the macroeconomic consequences that may affect the currency, thus shaping the price trend of the currency pair.…”

Examining the sustainable development approach of migrants' remittances and financial development in sub‐Saharan African countries

“…Contrary, remittances could increase the demand for goods that put more pressure on the local environment(L opez-Feldman & Chávez, 2017). On the other hand, several papers attempted to answer whether natural resources are a curse or blessing for the financial sector in terms of stability or development of the financial sector(Dwumfour & Ntow-Gyamfi, 2018;Akdag et al, 2021). Finally, additional macroeconomic variables are employed as control variables.…”