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Effect of trade and economic policy uncertainties on regional systemic risk: Evidence from ASEAN

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  • Dogah, Kingsley E.

Abstract

How are the Association of Southeast Asian Nations (ASEAN) markets managing global policy uncertainties? Which policy drives regional fluctuations? Although less literature is available on emerging economies, this study fills the gap by investigating the spillover effects of economic and trade policy uncertainty from the US and China on regional systemic risk in ASEAN markets. Using monthly stock returns from ASEAN-5, within a time-varying parameter vector autoregressive approach, this study shows that although policy uncertainty shocks from the US are significant, their effect on ASEAN markets started to wane from late 2013, with China's policy uncertainty overtaking the US as the leading systemic risk contributor. In particular, China's trade policy uncertainty demonstrates the most influential contagion effect on ASEAN markets. The results accentuate the strength of bilateral and trade relations via supply-side shock channels as a key determinant of emerging markets' exposure to policy uncertainty headwinds from global hegemonies.

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  • Dogah, Kingsley E., 2021. "Effect of trade and economic policy uncertainties on regional systemic risk: Evidence from ASEAN," Economic Modelling, Elsevier, vol. 104(C).
    • Handle: RePEc:eee:ecmode:v:104:y:2021:i:c:s0264999321002145
    DOI: 10.1016/j.econmod.2021.105625
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    Cited by:

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    5. Chada, Swechha, 2023. "Economic policy uncertainties and institutional ownership in India," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    6. Higgins, C. Richard, 2023. "Risk and Uncertainty: The Role of Financial Frictions," Economic Modelling, Elsevier, vol. 119(C).
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    8. Ting Yao & Liangrong Song, 2023. "Can digital transformation reduce bank systemic risk? Empirical evidence from listed banks in China," Economic Change and Restructuring, Springer, vol. 56(6), pages 4445-4463, December.
    9. Kai‐Hua Wang & Zu‐Shan Wang & Hong‐Wen Liu & Xin Li, 2023. "Economic policy uncertainty and geopolitical risk: evidence from China and Southeast Asia," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 37(2), pages 96-118, November.
    10. Trabelsi, Nader & Umar, Zaghum & Dogah, Kingsley E. & Vo, Xuan Vinh, 2024. "Are investment grade Sukuks decoupled from the conventional yield curve?," International Review of Financial Analysis, Elsevier, vol. 91(C).

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    More about this item

    Keywords

    Trade policy uncertainty; Economic policy uncertainty; COVID-19; Regional systemic risk; ASEAN;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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