Connectedness of commodity, exchange rate and categorical economic policy uncertainties — Evidence from China

Abstract

This paper provides a fresh perspective to explore the network correlations among commodity, exchange rate, and categorical economic policy uncertainties (EPU) in China. We try to contribute to the literature by examining the spillover mechanism with a relatively novel connectedness network using the monthly data over the period between June 2006 and January 2021. Our results suggest that prior to the recession, China’s commodity price is subject to greater spillovers from the exchange rate than recessions. The domestic commodity prices are more sensitive to monetary policy uncertainty and fiscal policy uncertainty. The occurrence of COVID-19 revises the dominance in the system from monetary policy uncertainty and fiscal policy uncertainty to trade policy uncertainty.