Theoretical and Applied Economics
No. 3 / 2017 (612), Autumn
Causality between economic policy uncertainty and exchange rate in China with considering quantile differences
Ocean University of China, Qingdao, Shandong, China
Jing-wen ZHANG
College of Finance and Statistics, Hunan University, Changsha, China
Xiu-zhen YU
Qingyang Municipal Sub-branch PBC, Qingyang, Gansu, China
Xin LI
Antai College of Economics & Management, Shanghai Jiao Tong University, Shanghai, China
Abstract. Under an existing theoretical framework regarding the relationship between investment decision and the size of economic policy uncertainty (EPU), this paper tests the causality between EPU and exchange rate (ER). Theoretically, the impact of EPU on ER should be treated asymmetrically since investors need higher risk premiums to offset the consequences of growing EPU. The causality is investigated by using the quantile Granger causality test. This test shows that causality is more significant in the tail quantile interval. Since EPU of China is extremely high since 2016, and ER also experienced huge fluctuations during this period, our result provides an empirical basis for international investors to protect themselves against the risks associated with EPU in the exchange market.
Contents
The European Union's strategy for increasing the living conditions of the population in the member states
Does institutional environment affect the economic development? Evidence from selected CEE countries
Causality between economic policy uncertainty and exchange rate in China with considering quantile differences
An agency theory approach on Romanian listed companies’ capital structure
What impact has free trade area on economies of ASEAN-5 countries?
Is more government debt or currency depreciation expansionary? The case of Poland
Long-memory, self-similarity and scaling of the long-term government bond yields: Evidence from Turkey and the USA
Hard currency inflows and sterilization policy in Algeria: An ARDL approach
Evaluating Indian economy’s vulnerability to currency crisis
Impact of fiscal responsibility legislations on state finances in India
Does fiscal policy spur economic growth? Empirical evidence from Algeria
Financial conditions index (FCI), inflation and growth: Some evidence
On the effects of total productivity growth of economic freedom and total resource rents: The case of both natural resource rich and OECD countries