Time-varying Effects of U.S. Economic Policy Uncertainty on Exchange Rate Return and Volatility in China

Wang, Panpan; Li, Yishi; Wu, Simin

doi:10.1080/1540496x.2021.1937114

Cited by 10 publications

(6 citation statements)

References 26 publications

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“…Liming Chen, Ziqing Du, and Hu Zhihao (2020) confirm that Europe and Japan EPUs display inverted-U-shaped correlations with exchange rate volatility in China. Panpan Wang, Li Yishi, and Wu Sixu (2022) determine that the rising U.S. EPU amplifies the renminbi exchange rate return volatility, and volatility spillover is further enhanced by trade friction.…”

Section: Literature Reviewmentioning

confidence: 99%

No longer a safe haven currency? A fresh evidence of Japanese yen under uncertainty

Lee

Tao

2024

Panoeconomicus

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This paper aims to study the safe haven attribute of the Japanese yen under domestic and U.S. economic and policy uncertainty (EPU). Because of the existence of structural changes, a bootstrap rolling window subsample causality test is used to enhance the credibility of the results. The empirical results confirm that the exchange rate returns (RER) and Japanese EPU are correlated in specific periods when major economic or political events occur. In most crisis periods, the Japanese EPU has positive effects on RER, and the yen appreciates when the EPU is increasing. In addition, the RER of the yen and U.S. EPU are both negatively and positively connected. This finding confirms the hedging function of the yen in certain periods. The reason for this relationship is that Japan's low interest rates make the yen the primary funding currency in speculative carrying trade strategies, and thus, it tends to appreciate during crisis periods regardless of the origins of the EPU shocks. Therefore, the yen can be held as a safe haven currency unless the government intervenes artificially.

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Section: Literature Reviewmentioning

confidence: 99%

No longer a safe haven currency? A fresh evidence of Japanese yen under uncertainty

Lee

Tao

2024

Panoeconomicus

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“…It was observed that uncertainty indices explained changes in different economic and financial variables quite well. Upon reviewing studies in the literature, it is observed that it significantly explains changes in variables such as financial markets (Liu & Zhang, 2015; Chen, Jiang, & Tong, 2017; Debata & Mahakud, 2018; Lei & Song, 2020; Batabyal & Killins, 2021; Chang, 2022), investments (Kang, Lee, & Ratti, 2014; Wang, Chen, & Huang, 2014; Drobetz, Ghoul, Guedhami, & Janzen, 2018; Choi, Furceri, & Yoon, 2021; Nguyen & Lee, 2021; Qamruzzaman, Karim, & Jahan, 2022) and exchange rates (Krol, 2014; Bartsch, 2019; Liming, Ziqing, & Zhihao, 2020; Wang, Li, & Wu, 2022; Smales, 2022; Sohag, Gainetdinova, & Mariev, 2022).…”

Section: Historical Development and Literature Review Of Economic Unc...mentioning

confidence: 99%

The contagious effect of economic policy uncertainty in the post-crisis period

Şeker

2023

ECON

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PurposeThis study aims to analyze the contagious effects of economic policy uncertainties in the USA on the economies of its important trading partners, such as Japan, Canada, Mexico and the Eurozone.Design/methodology/approachIn the study using the uncertainty index created by Baker et al. (2016), the interaction between variables was analyzed with structural VAR (SVAR) models.FindingsAccording to the results obtained from the analysis, economic policy uncertainties in the USA had significant effects on the economies of its high-volume trading partners. The internal debt crisis experienced in the Eurozone after the 2008 crisis caused the European Central Bank to respond to the economic policy uncertainties in the USA with contractionary monetary policies, unlike other countries. In addition to these results, Mexico, which has a more fragile economic structure than other countries in the analysis, was more impacted by increasing uncertainties, as expected.Originality/valueThe present study aimed to bring a new perspective to the literature by evaluating the contagiousness of local uncertainty in the globalizing world and the monetary policies implemented as a precaution against this situation on an empirical plane.

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“…Additionally, only domestic uncertainty produced significant effect during recessions. Similarly, Bartsch (2019), Li and Zhong (2020), Wang, Li and Wu (2022), Zhou et al (2020), Liming, Ziqing and Zhihao (2020), Abit and Rault (2021), Bush and Noria (2021) documented that EPU shocks exert positive effects on exchange rate fluctuations. However, literature about the impact of uncertainty on exchange rate volatility in Turkey is still very scarce.…”

Section: Introductionmentioning

confidence: 97%

Global Uncertainty and Exchange Rate Volatility

Tümtürk¹

2022

ekoist

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This paper investigates the impact of global uncertainty on Turkey's exchange rate volatility via quantile regression approach. Using quantile regression approach, estimated uncertainty coefficients are allowed to differ over quantiles of the exchange rate volatility. The EGARCH model is the best fit for measuring exchange rate volatility due to the fact that exchange rate series exhibit "asymmetric volatility". In this study we employed global economic policy uncertainty index-GEPU constructed by Baker et al. ( 2013) as a proxy of global uncertainty. Empirical results suggest that higher volatility of exchange rate is associated with a greater positive shock of GEPU. However, estimated parameters are statistically significant at lower exchange rate volatility since the CBRT intervenes the foreign exchange markets and restricts the excessive fluctuations in exchange rates to achieve financial stability.

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Time-varying Effects of U.S. Economic Policy Uncertainty on Exchange Rate Return and Volatility in China

Cited by 10 publications

References 26 publications

No longer a safe haven currency? A fresh evidence of Japanese yen under uncertainty

No longer a safe haven currency? A fresh evidence of Japanese yen under uncertainty

The contagious effect of economic policy uncertainty in the post-crisis period

Global Uncertainty and Exchange Rate Volatility

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