ABSTRACT
This paper employs a spatial econometrics method to study the international spillovers of economic policy uncertainty (EPU), and contributes to the literature by exploring the transmission channels. We comprehensively consider bilateral trade, financial investment, and information channels (government liability, trade imbalance, fiscal imbalance, business cycle). Based on a large sample of 21 countries from 2001Q1 to 2021Q4, our analysis indicates that the channels proposed are all significantly effective, and bilateral trade contributes the most. We also investigate the dominant channels during five crisis and non-crisis periods: in the global financial crisis, financial investment and government liability similarity are of utmost importance; in European debt crisis, bilateral trade and information channels of government liability and business cycle are the main channels; before these crises, the dominant channel is financial investment, which turned to be bilateral trade in the post-crises period; in COVID-19 pandemic, financial investment is the most important.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 Wind is a large-scale data warehouse in China for financial engineering and finance, with financial data and securities data as the core.
2 We have conducted sensitivity analyses for the division of different periods. The results show that change of the breakpoint dates does not affect the relative importance of transmission channels.