Sun, X., Yao, X. and Wang, J. (2017) Dynamic Interaction between Economic Policy Uncertainty and Financial Stress: A Multi-Scale Correlation Framework. Finance Research Letters, 21, 214-221. https://doi.org/10.1016/j.frl.2016.12.010

has been cited by the following article:

• TITLE: The Casual Relationship between China’s Financial Stress and Economic Policy Uncertainty: A Bootstrap Rolling-Window Approach

  AUTHORS: Xin Li, Rundong Zhang, Jin Wang

  KEYWORDS: Financial Stress, Economic Policy Uncertainty, Time-Varying Causality, Rolling Window

  JOURNAL NAME: American Journal of Industrial and Business Management, Vol.9 No.6, June 27, 2019

  ABSTRACT: This study explores the causal relationship between China’s financial stress and economic policy uncertainty. Considering structural changes in two series, we find that long-run nexus using full-sample data are unstable, suggesting that causality tests cannot be relied upon. Then, we employ a time-varying rolling window estimation to re-examine the dynamic causalities. The empirical results show that financial stress has both positive and negative impacts on economic policy uncertainty in several sub-periods, meanwhile, economic policy uncertainty has the same effects on financial stress in China, which illustrates that the time-varying causality exists between two variables. These findings indicate that the government should make the formulation of macroeconomic policies stable and strengthen the supervision of financial markets, including the guidance of the public reasonable expectations, which are critical to the economic development in China.