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The Impact of US Economic Policy Uncertainty Shock on GCC Stock Market Performance

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  • Alqahtani Abdullah

    (University of Washington, Seattle, WA, USA)

  • Taillard Michael

    (Central Michigan University, MSA, Mount Pleasant, MI, USA)

Abstract

This study examines the impact of the United States’ Economy Policy Uncertainty (US EPU) shocks on the Gulf Cooperation Council (GCC) countries’ stock market returns which are heavily related through global oil markets. Using monthly data spanning from 31/01/2010 to 31/08/2018, we employ a Non-Structural Vector Autoregression (VAR) and Vector Granger Causality Tests (VGCT) in order to ascertain the magnitude of transmitted shocks and to primarily evaluate if US EPU affects stock market returns in any of the GCC countries. Our OLS and VAR results suggest that US EPU has little impact on the GCC markets with the exception of Bahrain. The Vector Granger Causality Test confirms that changes in US EPU influence returns on Qatar’s stock market. These results will help GCC nations to stabilize global energy markets and prevent economic ripples to policy shocks.

Suggested Citation

  • Alqahtani Abdullah & Taillard Michael, 2019. "The Impact of US Economic Policy Uncertainty Shock on GCC Stock Market Performance," Asian Journal of Law and Economics, De Gruyter, vol. 10(2), pages 1-13, August.
    • Handle: RePEc:bpj:ajlecn:v:10:y:2019:i:2:p:13:n:1
    DOI: 10.1515/ajle-2019-0001
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    Cited by:

    1. Abdullah Alqahtani & Julien Chevallier, 2020. "Dynamic Spillovers between Gulf Cooperation Council’s Stocks, VIX, Oil and Gold Volatility Indices," JRFM, MDPI, vol. 13(4), pages 1-17, April.

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    More about this item

    Keywords

    EPU; GCC; Granger Causality Test; Vector Autoregression (VAR);
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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