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Economic Policy Uncertainty And Foreign Holdings Of Us Treasuries: The Global Evidence

Author

Listed:
  • SHAN WU

    (School of Finance, Nanjing University of Finance and Economics, Nanjing, P. R. China)

  • YUQIN ZHOU

    (��School of Economics and Management, Chongqing Normal University, Chongqing, P. R. China)

  • ZHENHUA LIU

    (��School of Economics and Management, China University of Mining and Technology, Xuzhou, P. R. China)

  • MU TONG

    (�School of Economic Information Engineering, Southwestern University of Finance and Economics, Chengdu, P. R. China)

Abstract

In the context of the increasing global economic policy uncertainty (EPU) and the gradual reduction of US Treasuries holdings in many countries, based on the ADCC-GARCH model and sensitivity analysis, we find that the relative increase of instability in the global economic system will affect foreign investors’ decision-making of investing in the US Treasuries, especially during the high uncertainty period. Shocks in global uncertainty significantly and negatively explain most samples’ time-varying correlations with a lag of one or two months. To some extent, the sustainability and investors’ inherent understanding of US Treasuries’ safety has been shaken in the recent years. Our findings hold important implications for both foreign investors and financial advisors who are interested in US Treasuries.

Suggested Citation

  • Shan Wu & Yuqin Zhou & Zhenhua Liu & Mu Tong, 2025. "Economic Policy Uncertainty And Foreign Holdings Of Us Treasuries: The Global Evidence," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 70(02), pages 325-342, March.
    • Handle: RePEc:wsi:serxxx:v:70:y:2025:i:02:n:s0217590821500284
    DOI: 10.1142/S0217590821500284
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    Keywords

    Foreign holdings of US treasuries; economic policy uncertainty; sensitivity analysis; ADCC-GARCH;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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