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The impact of EPU spillovers on the bond market volatility: Global evidence

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  • Gong, Yuting
  • Li, Xiao
  • Xue, Wenjun

Abstract

This paper studies the effect of economic policy uncertainty (EPU) spillovers from other countries on local bond market volatility. Using multivariate quantile model (White et al., 2015), we develop a country-specific EPU spillover measure for 23 economies from 2003 to 2019. We find that EPU spillovers have a significantly positive effect on local bond market volatility. This effect becomes stronger if the spillovers are from developed markets and when the spillovers are measured during financial crises. Recognizing the relation between EPU spillovers and bond volatility can motivate policy makers to closely monitor foreign EPU and take actions to alleviate the detrimental influence when foreign EPU rises.

Suggested Citation

  • Gong, Yuting & Li, Xiao & Xue, Wenjun, 2023. "The impact of EPU spillovers on the bond market volatility: Global evidence," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003033
    DOI: 10.1016/j.frl.2023.103931
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    References listed on IDEAS

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    1. He, Feng & Wang, Ziwei & Yin, Libo, 2020. "Asymmetric volatility spillovers between international economic policy uncertainty and the U.S. stock market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
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    5. Yen, Kuang-Chieh & Cheng, Hui-Pei, 2021. "Economic policy uncertainty and cryptocurrency volatility," Finance Research Letters, Elsevier, vol. 38(C).
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    Cited by:

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    2. Bouri, Elie & Gök, Remzi & Gemi̇ci̇, Eray & Kara, Erkan, 2024. "Do geopolitical risk, economic policy uncertainty, and oil implied volatility drive assets across quantiles and time-horizons?," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 137-154.

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    More about this item

    Keywords

    EPU spillovers; Country-level bond market volatility; Multivariate quantile model; International asset pricing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F30 - International Economics - - International Finance - - - General

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