The motivation of the study is to gauge the impact of economic policy uncertainty (EPU), knowledge spillover (KS), and climate change (CC) on green economy (GE) transition in BRIC nations for the ...period from 1991 to 2018. The study applied several unit root tests, including DF-GLS and Zivot–Andrew, for ascertaining the stationarity properties of variables. The long-run association between variables was detected by employing ARDL bound test, tBDM test, and Bayer and Hanck combined cointegration test. Furthermore, the asymmetric effects of EPU, KS, and CC on GE were examined by implementing nonlinear ARDL (NARDL), and finally, directional causal effects were evaluated with the Toda–Yamamoto causality test. In addition, the long-run coefficient’s robustness was assessed by applying fully modified OLS, dynamic OLS, and canonical cointegrating regression (CCR). ARDL bound testing confirms the long-run association in the empirical model for all countries with negative statistically significant effects from EPU and CC to the green economy and positive statistically significant impacts from KS to GE. On the other hand, asymmetric assessment established both long- and short-run asymmetry between EPU, KS, CC, and GE. Finally, directional causality establishes feedback hypothesis holds for EPU and GE in Brazil, India, China, KS, and GE in Brazil, Russia, and China. Thus, study findings established that EPU and KS might influence the transition to the green economy in BRIC nations. Thus, for policy formulation targeting green economic development, it is imperative to put extra effort into understanding the role of EPU and knowledge spillover in the economy.
Economic policy uncertainty generally tends to induce a pessimistic view of future market behaviour. Furthermore, instabilities in global oil prices have serious implications for the economies of oil ...exporters and importers, due to their over-dependence on crude oil for revenue and production activities, respectively, and thereby on stock market indices. Against limited empirical evidence, this study examines the spillover effects from global economic policy uncertainty (GEPU) and oil price volatility to the volatility of the stock market indices of oil exporters and importers in both developed and emerging economies. The results show that the spillover effect from GEPU to oil exporters is relatively smaller than to oil importers, for both developed and emerging countries. Conversely, the volatility spillovers from oil prices to oil exporters are relatively larger than to oil importers, for both developed and emerging countries. Specifically, the volatility spillovers from oil prices to oil exporters (importers) in emerging countries are relatively stronger compared to oil exporters (importers) in developed countries. The findings indicate that the volatility of the stock markets of emerging countries is more sensitive to global factors such as GEPU and oil price volatility, and that oil exporters and importers in emerging economies are more sensitive to oil price volatility than oil exporters and importers in developed economies, which is in line with previous studies
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The research debate on the informational content embedded in option prices mostly approves the incremental predictive power of implied volatility estimates for financial volatility forecasting beyond ...that contained in GARCH and realized variance models. Contributing to this ongoing debate, we introduce the novel AIM-HEAVY model, a tetravariate system with asymmetries, option-implied volatility, and economic uncertainty variables beyond daily and intra-daily dispersion measures included in the benchmark HEAVY specification. We associate financial with macroeconomic uncertainties to explore the macro-financial linkages in the high-frequency domain. In this vein, we further focus on economic factors that exacerbate stock market volatility and represent major threats to financial stability. Hence, our findings are directly connected to the current world-wide Coronavirus outbreak. Financial volatilities are already close to their crisis-peaks amid the generalized fear about controversial economic policies to support societies and the financial system, especially in the case of the heavily criticized UK authorities' delayed and limited response.
This paper analyzes the volatility patterns of oil and natural gas prices in the United States and how they have changed due to economic policy uncertainty in the pre- and post-shale era. Using ...Markov-Switching GARCH models, we find evidence of heterogeneous volatility regimes for both commodities (i.e., high vs. low volatility). While the volatility persistence for oil is similar during the two sub-periods, significant changes have occurred to the natural gas market. Using quantile regressions, we find that economic policy uncertainty increases the probability of agitated market conditions of both markets, although this effect has weakened during the post-shale period.
•Heterogeneous volatility regimes for crude oil and natural gas (high vs. low volatility).•Tranquil market conditions are more persistent for crude oil before and after 2010.•Agitated conditions become more persistent for natural gas after 2010.•Economic Policy Uncertainty increases likelihood of agitated market conditions.•Effect of Economic Policy Uncertainty dampened after 2010.
Can we use newspaper articles to forecast economic activity? Our answer is yes; and, to this end, we propose a high-frequency Text-based Economic Sentiment Index (TESI) and a Text-based Economic ...Policy Uncertainty (TEPU) for Italy. Novel survey evidence regarding Italian firms and households supports the rationale behind studying text data for the purposes of forecasting. Such indices are extracted from approximately 1.5 million articles from 4 popular newspapers, using a novel Italian economic dictionary with valence shifters. The TESI and TEPU can be updated daily for the whole economy and for specific sectors or economic topics. To test the predictive power of our indicators, we propose two forecasting exercises. Firstly, we use Bayesian Model Averaging (BMA) techniques to show that our monthly text-based indicators greatly reduce the uncertainty surrounding the short-term predictions of the main macroeconomic aggregates, especially during recessions. Secondly, we employ these indices in a weekly GDP tracker, achieving sizeable gains in forecasting accuracy, both in normal and turbulent times.
•We find that economic policy uncertainty increases cost of debt across 17 countries.•This effect is stronger during the global financial crisis.•This effect is weaker in large firms.
Prior research ...shows that economic policy uncertainty affects a wide range of corporate financial decisions; however, there is little research on the relationship between economic policy uncertainty and cost of debt financing across countries. In this paper, we argue that economic policy uncertainty affects cost of debt financing through two mechanisms including information asymmetry and default risk. With a sample of 163,243 firm-years across 17 countries from 2003 to 2016, we find that economic policy uncertainty positively affects cost of debt financing and this effect is stronger during the global financial crisis from 2008 to 2009. Moreover, our research findings show that large firms’ debt financing cost is less affected by economic policy uncertainty.
Theoretically, geopolitical risk and policy uncertainties can directly affect energy markets. Since fluctuations in it lead to cost the of clean energy sources as they compete with traditional ...energy. Regarding this, our study aims to scrutinize the impact of geopolitical oil price uncertainty on clean energy stocks by controlling the influences of economic policy uncertainty, gold, natural gas, and coal prices. For that purpose, the study utilized monthly data from July 2007 to September 2020 and employed a machine learning method, namely kernel-based regularized least squares approach. Empirical analysis reveals that geopolitical oil price uncertainty and coal prices have a nonlinear positive effect on clean energy stock prices. It is also found that the impact of global economic policy uncertainty, gold, and natural gas prices on clean energy stock prices is nonlinear and negative. The implication signifies that clean energy stock prices are hampered by economic policy uncertainty, and gold, and natural gas prices, thus hindering the development of clean energy sources. Similarly, for the robustness of the study, the quantile regression approach and findings reveal similar outcomes to that of the KRLS model. Based on these findings, policy implications that potentially aid renewable energy investments are put forward. The study also guides investors, financial advisors, and portfolio managers for better decision-making in consideration of uncertainties and associated fluctuations in energy markets and commodity prices.
This study examines the asymmetric relationships between EU sectoral stocks and oil, oil implied volatility, geopolitical risk, and market sentiment during turbulent times of geopolitical unrest. In ...a set of parametric and nonparametric quantile-based techniques, we employ daily data on eleven sectors of economic activity in addition to crude oil prices (WTI) and three sentiment-driven indices tracking the crude oil volatility (OVX), geopolitical risk (GPR), and investor sentiment (VIX) over the period between January 2020 and October 2022. Findings from the causality-in-quantile-means test suggest that the sectoral stock returns from the EU are asymmetrically predicted by WTI, OVX, VIX and GPR. The findings from the quantile regression and quantile-on-quantile regression metrics demonstrate that (i) in bearish periods, EU sectoral stocks could hedge against GPR, (ii) WTI does not serve as a hedge for EU stocks regardless of the sector of economic activity, and (iii) OVX and VIX possess some hedging and safe-haven attributes against EU stocks. These findings have notable implications for market regulation and portfolio management.
•We study asymmetric impacts of oil, geopolitics, & sentiment on EU sectoral stocks.•We track oil (WTI), volatility (OVX), geopolitical risk (GPR), and sentiment (VIX).•EU sectoral stock returns are asymmetrically predicted by WTI, OVX, VIX, and GPR.•In crises EU stocks could hedge against GPR while WTI is not a hedge for EU stocks.•OVX and VIX possess some hedging and safe-haven attributes against EU sector stocks.
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This study explores the spillovers between economic policy uncertainty (EPU) and stock market realized volatility (RV). The monthly index of Chinese and US EPU and RV are used to ...analyze the pairwise directional spillovers. We find that RV is a net receiver that is more vulnerable to shocks from U.S. EPU than to shocks from Chinese EPU. We further decompose the RV into good and bad volatility to test the asymmetric spillover effect between the stock market and EPU. The results suggest that EPU has a bigger effect on bad volatility in the stock market throughout most of the sample period. However, we find that good volatility spillovers become larger during periods of stimulated reform, whereas bad volatility spillovers become larger during periods of international disputes. We show that Chinese stock market volatility is sensitive to both U.S. and Chinese EPU and that the spillover is asymmetric in different periods.
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