Economic policy uncertainty, oil and stock markets in BRIC: Evidence from quantiles analysis

Abstract

This paper investigates the relationship between EPU, oil and stock markets in the BRIC countries under different market conditions. The multivariate quantile VAR approach is used to analyze the possible asymmetric linkage across the entire distribution rather than only on the conditional mean. The empirical results show that, when the Brent oil market is prosperous, EPU in China and India has a negative impact on the oil returns, whereas EPU in Russia and Brazil has a positive effect. Generally, BRIC's EPU has a reverse effect on the stock markets. The economic policies of China and Russia are more vulnerable to fluctuations in oil and stock markets. The BRIC's stock markets are more affected by negative oil returns, whereas the oil markets are more affected by positive stock returns.