Economic policy uncertainty in the US and China and their impact on the global markets |
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| Affiliation: | 1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China;2. Baruch College, City University of New York, New York, USA;3. Centre for Energy and Environmental Policy Research, Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China;4. School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China;5. School of Business, Southern Illinois University Edwardsville, USA;1. Université de La Réunion - CEMOI and TEPP-CNRS (FR3435), France;2. Università di Corsica - CEMOI and UMR CNRS 6240 LISA, France;1. School of Economics and Finance, Massey University, Albany, New Zealand;2. Department of Management and Engineering, Linköping University, Linköping, Sweden;3. Department of Economics, Pusan National University, Busan, Republic of Korea;1. Aoyama Gakuin University, Shibuya 4-4-25, Shibuya-ku, Tokyo 150-8366, Japan;2. Hankuk University of Foreign Studies, 107, Imun-ro, Dongdaemun-gu, Seoul 130-791, Republic of Korea;1. School of Economics and Finance (Albany), Massey University, Private Bag 102 904, North Shore MSC, Auckland 0745, New Zealand;2. Citic Securities, Changsha, PR China |
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| Abstract: | The recent US-China trade conflict has caused substantial uncertainty in the global markets. What is the rationale of this conflict? Is the rising of Chinese economy imposing a realistic threat to the US-led post-war international system? Using economic policy uncertainty in each of these two key global economic players as a measure of policy stance, this paper builds a time series model following Diebold and Yilmaz (2014) to estimate the influence of both the US and China on several key international markets, namely, stock, credit, energy and commodity markets. We find that, although China has become more influential, the US's dominant position still holds in all the markets. The results suggest that concerns regarding China's competition with the US in shaping the global world order are more likely to be driven by political factors rather than economic motives. |
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| Keywords: | Connectedness Economic policy uncertainty Global economy Time varying Variance decomposition F42 F62 G15 O19 |
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