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The effects of foreign uncertainty shocks on China’s macro-economy: Empirical evidence from a nonlinear ARDL model

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  • Wen, Fenghua
  • Xiao, Yilin
  • Wu, Haiquan

Abstract

This paper investigates the impacts of uncertainty on China’s macro-economy by a nonlinear cointegrating autoregressive distributed lag (NARDL) model. The three widely used uncertainty proxies—economic policy (EPU), the financial markets (VIX), and energy market (OVX) are considered, and the short-run and long-run nonlinear asymmetric relationship between these three kinds of uncertainty and macroeconomic variables are examined. The empirical results provide significant evidence of short-run relationship between all types of uncertainty shocks and the China’s macro-economy except the effects of OVX on China’s output. Furthermore, in the long run, the results show that the asymmetric VIX seems to be the most relevant determinative uncertainty of China’s macro-economy; the economic policy uncertainty has a long-run asymmetric impact on China’s inflation; the increases in oil price uncertainty may damage China’s output and the decreases in the uncertainty of the energy market may lead to the rises in money supply. The findings of this study have significant implications for investors and policy-makers who are interested in uncertainty risks and who look forward to making more effective decisions.

Suggested Citation

  • Wen, Fenghua & Xiao, Yilin & Wu, Haiquan, 2019. "The effects of foreign uncertainty shocks on China’s macro-economy: Empirical evidence from a nonlinear ARDL model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 532(C).
    • Handle: RePEc:eee:phsmap:v:532:y:2019:i:c:s0378437119311082
    DOI: 10.1016/j.physa.2019.121879
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    Citations

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    Cited by:

    1. Shao, Liuguo & Zhang, Hua & Chen, Jinyu & Zhu, Xuehong, 2021. "Effect of oil price uncertainty on clean energy metal stocks in China: Evidence from a nonparametric causality-in-quantiles approach," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 407-419.
    2. de Oliveira, Erick Meira & Cunha, Felipe Arias Fogliano de Souza & Palazzi, Rafael Baptista & Klotzle, Marcelo Cabus & Maçaira, Paula Medina, 2020. "On the effects of uncertainty measures on sustainability indices: An empirical investigation in a nonlinear framework," International Review of Financial Analysis, Elsevier, vol. 70(C).
    3. Chen, Ying & Zhu, Xuehong & Li, Hailing, 2022. "The asymmetric effects of oil price shocks and uncertainty on non-ferrous metal market: Based on quantile regression," Energy, Elsevier, vol. 246(C).
    4. Bahram Adrangi & Arjun Chatrath, 2022. "Dynamic Responses of Major Pacific Rim Emerging Equity Markets to the US Crude Oil Fear Index (OVX)," Bulletin of Applied Economics, Risk Market Journals, vol. 9(1), pages 51-84.
    5. Lin Liu, 2021. "U.S. Economic Uncertainty Shocks and China’s Economic Activities: A Time-Varying Perspective," SAGE Open, , vol. 11(3), pages 21582440211, July.
    6. Kang, Sang Hoon & Lahmiri, Salim & Uddin, Gazi Salah & Arreola Hernandez, Jose & Yoon, Seong-Min, 2020. "Inflation cycle synchronization in ASEAN countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    7. Liu, Donghui & Meng, Lingjie & Wang, Yudong, 2021. "The asymmetric effects of oil price changes on China’s exports: New evidence from a nonlinear autoregressive distributed lag model," Journal of Asian Economics, Elsevier, vol. 77(C).
    8. Shao, Liuguo & Zhang, Hua, 2020. "The impact of oil price on the clean energy metal prices: A multi-scale perspective," Resources Policy, Elsevier, vol. 68(C).

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