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Does Economic Policy Uncertainty Affect Exchange Rate in China and Japan? Evidence from Threshold Cointegration with Asymmetric Adjustment

Author

Listed:
  • Riadh El Abed

    (University of Tunis El Manar, Facult des Sciences Economiques et de Gestion de Tunis, Laboratoire d Ing nierie Financi re et Economique, 65 Rue Ibn Sina, Moknine 5050, Tunisia,)

  • Zouheir Mighri

    (Department of Finance and Insurance, Saudi Arabia, College of Business, University of Jeddah, Saudi Arabia,)

  • Abderrazek Ben Hamouda

    (Faculty of Economics and Management of Tunis, University of Tunis El Manar, Tunisia.)

Abstract

In this article, we estimate the links between nominal exchange rates (JPY/USD and CNY/USD) and economic policy uncertainty (EPU) in China and Japan by employing monthly data during the period span from January 1997 to September 2020. The threshold cointegration approach focus in TAR, M-TAR, C-TAR and C-MTAR is used. Results indicate the evidence of asymmetric effect in the adjustment process to equilibrium and the M-TAR is the best model to detect threshold effect for the (CNY/USD-CNYEPU) pair and the C-TAR is the best model to detect threshold effect for the (JPY/USD-JPYEPU) pair.

Suggested Citation

  • Riadh El Abed & Zouheir Mighri & Abderrazek Ben Hamouda, 2022. "Does Economic Policy Uncertainty Affect Exchange Rate in China and Japan? Evidence from Threshold Cointegration with Asymmetric Adjustment," International Journal of Economics and Financial Issues, Econjournals, vol. 12(1), pages 28-36.
    • Handle: RePEc:eco:journ1:2022-01-05
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign Exchange Rate; Economic Policy Uncertainty; Nonlinear Cointegration; Asymmetric ECM;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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