Economic Policy Uncertainty In China Research Articles

Unraveling the nexus: China's economic policy uncertainty and carbon emission efficiency through advanced multivariate quantile-on-quantile regression analysis

The pursuit of green economic development, coupled with the endeavor towards achieving dual carbon objectives, has opened new pathways for sustainable progress in China. Nevertheless, the realization of the Sustainable Development Goals is closely intertwined with economic policy fluctuations. In this context, our study investigates the influence of economic policy uncertainty on the efficiency of carbon emissions in China over the period from 2005 to 2021. We employ the Multivariate Quantile-on-Quantile (m-QQR) Regression approach to dissect the tail dependence of model parameters amidst this uncertainty. The findings highlight how China's carbon emission efficiency is influenced by exogenous factors, including GDP per capita, energy consumption intensity, green building integration, and international trade openness. Furthermore, the analysis reveals nuanced dependencies across various quantiles. By elucidating these dynamics, this research provides valuable insights aimed at guiding China toward its dual-carbon goals and promoting the growth of a sustainable green economy.

The Impact of Economic Policy Uncertainty on the RMB Exchange Rate

Based on the monthly data from July 2005 to August 2021, this paper analyzes the impact of economic policy uncertainty (EPU) on the RMB exchange rate by using VAR model and VECM model in stata16. The results show that there is a two-way interactive causal relationship between the economic policy uncertainty and the fluctuation of the RMB exchange rate between China and the United States. The increased uncertainty of China's economic policy will have a depreciating impact on the RMB exchange rate, and the increased uncertainty of the US economic policy will have an impact on the appreciation of the RMB exchange rate. Through the comparison of the impulse response diagram of the RMB exchange rate from the uncertainty of the economic policy of China and the United States, the impact of China's economic policy uncertainty on the change of the RMB exchange rate is greater than that caused by the uncertainty of the US economic policy, and these conclusions are consistent with the theoretical analysis. The policy implication of this paper is that government departments should strengthen the measurement and monitoring of global EPU, maintain the stability of their own macroeconomy, enhance the transparency and continuity of their own policies, and avoid the adverse impact of large changes in exchange rates on economic development.

Exploring the relationship between China's economic policy uncertainty and business cycles: Exogenous impulse or endogenous responses?

This paper explores China's endogeneity of economic policy uncertainty (EPU). Previous studies have disagreed on the causal relationship between uncertainty and the business cycle. By using shock-based restrictions, we identify structural shocks and investigate the endogeneity of China's EPU index. The findings suggest that an increase in EPUs is more likely to cause fluctuations in the Chinese economy than the reverse. The paper also uncovers spillovers of China's EPU on the US EPU, indicating a national strategy at play. In the long run, EPU shocks in China account for at least 22% of China's economic activity variation and 30% of the US EPU variation. These findings remain consistent when accounting for the COVID-19 period, adopting heteroskedasticity identification schemes, and using alternative EPU indexes.

CHINA'S ECONOMIC UNCERTAINTY AND FOREIGN DIRECT INVESTMENT IN INDONESIA

The study examines the effects of China's economic policy uncertainty, trade openness, inflation, and the human development index on foreign direct investment (FDI) in Indonesia. This study uses multiple linear regression on annual data from 1995–2022. This research shows that China's economic policy uncertainty has a negative but significant on Indonesia's foreign direct investment while HDI, trade openness, and inflation all have a positive and significant impact on Indonesia's foreign direct investment. The study's findings indicate that trade openness, inflation, human development index, and China's economic policy uncertainties all have an impact on foreign direct investment, So, the government needs to estimate and monitor direct investment funds coming in, especially from China. To advance the nation, especially the welfare of society, there must be an increase in quality human resources. To draw in investors, it's also essential to raise transparency and manage the pace of inflation.

The Impact of China Economic Policy Uncertainty on CSI 300: An Analysis of the Mediating Effect of Investor Sentiment

This paper explores the mediating effect of investor sentiment on the relationship between China's economic policy uncertainty and the CSI 300 stock market returns. The study employs Principal Component Analysis (PCA) to construct the investor sentiment index, integrating six proxy variables. Additionally, the bootstrap analysis method is utilized to examine whether investor sentiment acts as an intermediary in determining the impact of economic policy uncertainty on stock market performance. The findings reveal that a significant portion (87.0%) of the total effect of economic policy uncertainty on stock returns is mediated through investor sentiment. The study underscores the pivotal role of investor sentiment in financial market behavior and emphasizes the need for policymakers to consider its influence during economic adjustments. Furthermore, it provides crucial recommendations for individual investors, promoting informed and rational decision-making in the dynamic financial landscape.

Economic policy uncertainty and natural resources commodity prices: A comparative analysis of pre- and post-pandemic quantile trends in China

This study examines the relationship between natural resource commodity prices and economic policy uncertainty in China, both before and after the COVID-19 pandemic. This study uses an innovative Quantile Autoregressive Distributed Lag (ARDL) model to uncover both short- and long-term linkages among variables of interest. This study finds that there is a quantile relationship between these variables, with economic policy uncertainty having a negative impact on gold and natural gas prices during and after the pandemic. In contrast, during the pre-pandemic era, economic policy uncertainty had a negative impact on gold and natural gas prices but not on oil prices. These findings have significant policy implications, particularly in the context of the pandemic and its effects on the global economy.

Do clean energy stocks and sub-sectors hedge China economic policy uncertainty: New evidence from wavelet analysis

This study aims to investigate the hedging properties of aggregate clean energy markets and their subsectors against China economic policy uncertainty from September 14, 2012, to June 16, 2022. We employed wavelet coherence with a phase difference to explore the time-frequency relationship between our chosen markets. Meanwhile, strong time-varying connectedness is observed between clean energy indices against China economic policy uncertainty, especially during market turmoil. In addition, asymmetric patterns in the interconnections of all markets are more evident between 4 and 64 days. However, fuel cells, green IT, and energy management sub-sectors are act as a strong hedge against economic policy uncertainty. In contrast, the global, US, and European aggregate clean energy markets act as strong hedge during different periods. Based on these empirical findings, this research proposes several important implications for energy investors, market regulators, and other market participants to make more informed decisions about their portfolio risk.

Economic policy uncertainty and geopolitical risk: evidence from China and Southeast Asia

This paper investigates the connectedness between China's economic policy uncertainty (EPU) and the geopolitical risk (GPR) of the countries in the Association of Southeast Asian Nations (ASEAN) using quantile time‐varying parameter vector autoregression. The empirical results indicate that China's EPU becomes a net risk transmitter at the median quantile, demonstrating that ASEAN countries' GPR is vulnerable to China's economic shocks. Furthermore, extreme events such as COVID‐19 amplify the connection between EPU and GPR, leading to a higher total connectedness index value. Moreover, the pairwise spillover effect analysis reflects that the risk launcher effect of China's EPU is longer and more prominent for Thailand and the Philippines than for Malaysia and Indonesia, which enriches the hypothesis. The contributions are as follows. This paper selects emerging China as the research object and first discusses its economic influence on neighbouring countries. In addition, fully analysing the heterogeneous spillover effects of EPU on the GPR of different countries makes our suggestions diversified and practical. Therefore, improving recognisable ability and institutional quality will promote ASEAN countries to mitigate their vulnerability to China's EPU shocks. Meanwhile, China's government should quickly respond to external uncertainties, prudently adjust economic policies, and avoid large swings of EPU volatility.

Revisiting the natural resources-financial development nexus in China: The importance of economic policy uncertainty

The existing literature extensively probes how natural resources impact financial development, however, there is no evidence on the role of economic policy uncertainty amidst the natural resources-financial development nexus. Moreover, the prior literature ignores the effect of structural breaks while estimating the parameters. Based on such arguments, this study investigates the combine impact of natural resources and economic policy uncertainty on financial development in case of China for the period of 1989–2021. In doing so, we apply noval econometric approach which handles the structural breaks named as Fourier Autoregressive Distributed Lag (FARDL) aaproach. Our findings show that natural resources escalate financial development, however, the synergy of natural resources and economic policy uncertainty plunges financial development across the long-run and short-run. Further, we run sensitivity analysis and find the results similar to the baseline outcomes. The results compel us to suggest some policy recommendations. For instance, policymakers should strive to control economic policy uncertainty in China for the promotion of financial development.

Impact of economic policy uncertainty on audit fees: Evidence from Chinese listed companies

High economic policy uncertainty in China amplifies operational risks and managerial pressure for businesses while driving the demand for independent audits. However, previous studies have paid limited attention to the impact of economic policy uncertainty on audit fees. This study aims to examine the impact of economic policy uncertainty on audit fees and to test whether the internal control quality will moderate this association at the firm level. This study employs the economic policy uncertainty index to measure uncertainty. The paper examines 3,469 Chinese A-share listed companies from 2007 to 2020, using STATA 17 for fixed-effects regression on panel data. The results show a robust positive association between economic policy uncertainty and audit fees (β = 0.0302, p < 0.001). However, this association is weaker for companies with better internal control quality (β = –0.0229, p < 0.001), suggesting that effective internal controls can mitigate the impact of economic policy uncertainty on audit fees. Furthermore, the findings indicate that this positive association is weaker for state-owned companies compared to non-state-owned companies (β = –0.0170, p < 0.001). At the same time, the study does not establish a significant difference in the positive association between TOP 10 and non-TOP 10 accounting firms. This study examines the adverse effects of economic policy uncertainty from the perspective of audit fees. The results have implications for stakeholders, including the need for companies to establish effective internal controls and good government-business relationships and for governments to reduce economic policy uncertainty and increase transparency in their policies.

Enhancing exchange rate volatility prediction accuracy: Assessing the influence of different indices on the USD/CNY exchange rate

In this paper, the GARCH-MIDAS model is used to empirically study the influence of several uncertainties on the volatility of the CNY-USD forex market. The sample and out-of-sample prediction results show that the nine uncertainty indexes significantly impact the volatility of the CNY-USD forex market and can improve the prediction effect of CNY-USD rate volatility. Then using model confidence set and Direction-of-change test out-of-sample test, it is found that Compared with China's Economic policy uncertainty and China's trade policy uncertainty, US Economic Policy Uncertainty and US trade policy uncertainty can improve the prediction accuracy of CNY-USD forex market volatility.

On conflict of natural resources-carbon emissions nexus in China: The role of economic policy uncertainty

Environmental degradation has been an acute issue all over the world, especially in emerging economies. Being an emerging economy, China also witnesses this issue. Therefore, actions have been taken by the Chinese policymakers to wane CO2 emissions, which in turn lead to environmental degradation. However, policy actions need strong research-backed evidence on the drivers of CO2 emissions. Hence, researchers explore the determinants of CO2 emissions. Prior literature explores how economic policy uncertainty and natural resources impact CO2 emissions, however, the role of economic policy uncertainty amid the natural resource-emissions nexus remains ignored. That is, the interaction effect of EPU and NRR remains ignored in the existing literature. Hence, the present study attempts to investigate the natural resources-CO2 emissions nexus amidst economic policy uncertainty in China. The analysis adopts annual time series data covering the period 1989–2021. This study employs the novel Fourier ARDL to provide authentic outcomes. The results document that natural resources escalate emissions. Moreover, the synergy of natural resources and economic policy uncertainty also upsurges CO2 emissions. Thus, we propose to wane economic policy uncertainty to circumvent the environmental impacts of natural resources.

Volatility forecasting with an extended GARCH‐MIDAS approach

AbstractThis paper uses the generalized autoregressive conditional heteroscedasticity mixing data sampling (GARCH‐MIDAS) model to construct three types of extended models. Geopolitical risk uncertainty is included in the study as an introduced variable, and its impact on the Shanghai Stock Exchange (SSE) 50 index volatility is analyzed. The empirical analysis shows that the GARCH‐MIDAS‐RV‐EPU model with China's EPU is the best in predicting the volatility of China's stock market when the information of economic policy uncertainty (EPU) and geopolitical risk uncertainty (GPR) of other countries are included. When the common information model composed of China's economic policy uncertainty index and geopolitical uncertainty index is used to predict the volatility of the SSE, the model's prediction is better. Finally, when the model confidence set (MCS) and the interval length index that changes the forecast outside the sample are used to retest each conclusion, the results are very robust.

Policy uncertainty, geopolitical risks and China’s carbon neutralization

In the present study, it was explored how the volatility of the carbon neutrality concept index (CNCI) was affected by China economic policy uncertainty (CEPU) index, climate policy uncertainty (CPU) index, and geopolitical risk (GPR) index. According to the research of Amendola et al. the GARCH-MIDAS model was improved by introducing the realized kernel volatility of China stock market into the short-term volatility component. On this basis, the GARCH-RKV-MIDAS model was constructed. Meanwhile, both GARCH-MIDAS and GARCH-RKV-MIDAS models were applied to identify the influencing factors for CNCI volatility during the period between January 2018 and June 2022, with CNCI predicted. According to the research results, both the CPU index and the GPR index exert a significant effect on the long-term volatility of CNCI, despite no significant difference made by the CEPU index to the long-term volatility of CNCI. As for the prediction of CNCI volatility, the GARCH-RKV-MIDAS model clearly outperforms the GARCH-MIDAS model. Moreover, the CPU index outperforms the GPR index and the CEPU index in predicting the volatility of the CNCI.

The Response of CSR to Economic Policy Uncertainty: Evidence from China

The dynamics and instability of economic policies exercise considerable influence on firm behaviors. This study aims to explore the impact of economic policy uncertainty on the level of CSR that firms are engaged in and the heterogeneity of this impact across firms. Using a dataset of Chinese-listed companies from 2011 to 2019, which consists of 837 different firms and 4551 firm-year observations, the results show a negative response of CSR to economic policy uncertainty in China, which is mitigated by the political connections and resource slack that firms possess. These findings underscore the importance of a predictable business environment for CSR behaviors and the capability of firms to cope with uncertainty.

Economic policy uncertainty, geopolitical risks, and the heterogeneity of commodity price fluctuations in China ——an empirical study based on TVP-SV-VAR model

The combination of geopolitical conflicts and economic shocks could cause severe volatility in the global commodity market. Based on the monthly data from June 2006 to March 2023, this paper employs the TVP-SV-VAR model to investigate the time-varying impacts of economic policy uncertainty (EPU) and China's geopolitical risk (GPRC) on China's commodities prices (CCPI). The findings reveal that: (1) CCPI can be collectively influenced by EPU and GPRC shocks, with time-varying impulse responses showing notable fluctuations with alternating positive and negative values. The response of CCPI to EPU is more intense than that to GPRC shock after 2019; (2) Under the financial crisis, GPRC has a significantly positive impact on CCPI, while positive responses to global EPU and China's EPU are more pronounced under the Russia-Ukraine conflict. Under the Sino-US trade friction, the responses of CCPI to various shocks are mostly positive, with a continuing positive impact of EPU; (3) The responses of energy prices, agricultural product prices, and non-ferrous metal prices align with that of overall commodity prices. However, under the Russia-Ukraine conflict, the positive impulse responses of non-ferrous metal prices to EPU and GRPC shocks are persistent.

How does China economic policy uncertainty (EPU) impact copper-firms stock returns and copper prices returns?

PropósitoEste estudio se enfoca en como la incertidumbre en política económica de China (llamado China EPU) puede impactar en los retornos de las acciones de empresas del sector del cobre y como China EPU media entre los retornos de las acciones y los retornos de los precios del cobre.Diseño/metodología/enfoqueLa muestral consiste en 44 firmas de cobre desde enero 2011 a marzo 2022. El estudio también considera una sub muestra de 29 países que son exportadores netos de cobre. Se utiliza la metodología de datos de panel, permitiendo controlar por lo inobservable y por problemas de endogeneidad. Las ecuaciones son estimadas a través de panel dinámico usando el método generalizado de los momentos (G.M.M.).ResultadosEPU de China tiene una relación negativa y estadísticamente significativa con los retornos accionarios. Los retornos de los precios del cobre están positivamente asociados con los retornos accionarios. La investigación también considera dos posibles escenarios: altos y bajos niveles de EPU. Para el estado de altos niveles se reporta una relación negativa entre los retornos accionarios y el EPU de China, además los retornos de los precios del cobre muestran una relación positiva con los retornos accionarios.Limitaciones de la Investigación/ImplicanciasSe requiere explorar otros metales para los cuales China sea un importante demandante a nivel internacional y observar si el EPU de China y el EPU Global tienen similares impactos en los retornos accionarios. A su vez sería útil identificar las principales firmas consumidoras de cobres y estos otros metales de tal forma de chequear la relación entre EPU y retornos accionarios.Originalidad/valorEn nuestro mejor conocimiento, este es el primer artículo que analiza el índice EPU de China y como este impacta tanto los retornos accionarios de las empresas de cobre como los cambios de precios del cobre. Esto es hecho usando una muestral que incluye todas las empresas de cobre que se transan en bolsa a nivel internacional.

Economic Policy Uncertainty and Emerging Stock Market Volatility

This research examines the effect of economic policy uncertainty (EPU) indices on Pakistan's stock market volatility. Particularly, we examine the impact of the economic policy uncertainty index for Pakistan and bilateral global trading partner countries, the US, China, and the UK. We employ the GARCH-MIDAS model and combination forecast approach to evaluate the performance of economic uncertainty indices. The empirical findings show that the US economic policy uncertainty index is a more powerful predictor of Pakistan stock market volatility. In addition, the EPU index for the UK also provides valuable information for equity market volatility prediction. Surprisingly, Pakistan and China EPU indices have no significant predictive information for volatility forecasting during the sample period. Lastly, we find evidence of all uncertainty indices during economic upheaval from the COVID-19 pandemic. We obtained identical results even during the Covid-19. Our findings are robust in various evaluation methods, like MCS tests and other forecasting windows.

Promotion of green financing: Role of renewable energy and energy transition in China

This study examined the influence of green financing, renewable energy, and energy transition. Although the importance of natural resources has been discussed in the current literature, this study examines how China's environmental footprint has changed due to recent developments in green expenditure, natural resource rent (NRR) management, green technology innovation (GTI), and GDP growth. This was achieved using the NARDL method on data spanning 2000–2018. There is a need to examine how these factors affect the economic growth of underdeveloped nations. This research examines whether gross domestic product, green technological innovation, and economic policy uncertainty in China have contributed to resource curse theory. Natural resource rent stifled China's economic growth, as predicted by the resource curse theory and supported by empirical research. This is similar to how economic policy uncertainty stunted the green financing role of renewable energy and energy transition in China. Contrastingly, gross domestic product and green technology innovation help speed up financial growth while mitigating the impact of natural resources. Short- and long-term corporate plans and policies should be put in place based on the results, such as ensuring sufficient usage of natural resources, reallocating funding at regional governmental levels, and transitioning toward sustainable technology.

China's Economic Policy Uncertainty and China Commodity Futures Company Performance

Under the background of the innovation of the futures market, the mixed operation of the capital market and the liberalization of the financial market, China's futures companies are faced with rare opportunities for development, as well as severe difficulties and challenges. Based on the theoretical model and analysis, this paper discusses the impact of economic policy uncertainty on the performance of commodity futures companies based on the panel data of China's A-share agricultural, forestry, fishery and animal husbandry, manufacturing listed companies and the Baker's China economic policy uncertainty index from 2013 to 2020, and draws the conclusion that China's economic policy uncertainty can have a positive impact on the performance of China's agricultural, forestry, fishery and animal husbandry, manufacturing commodity futures companies. In light of this perspective, it is essential for government agencies to carefully assess the influence on various economic sectors while employing policy measures to manage economic growth and mitigate the effects of economic fluctuations. This would prevent policy-induced fluctuations. Simultaneously, it is crucial for commodity futures companies to bolster innovation and enhance their operational capabilities in order to secure long-term progress.