Baltic dry index and global economic policy uncertainty: evidence from the linear and nonlinear Granger causality tests

ABSTRACT

This study investigates the linear and nonlinear Granger causality relationship between the Baltic Dry Index (BDI) and global economic policy uncertainty (GEPU). There is a unidirectional linear Granger causality relationship running from GEPU to the BDI and no nonlinear Granger causality relationship between the BDI and GEPU. Hence, the Granger causality running from GEPU to the BDI is relatively direct, concise and swift but not very complicated. The linear Granger causality relationship between them is time-varying.

KEYWORDS:

• Baltic dry index
• global economic policy uncertainty
• linear Granger causality
• nonlinear Granger causality

JEL CLASSIFICATION:

• F00
• O20
• O29
• P45

Highlights

• There is a linear Granger causality relationship running from GEPU to the BDI.

• There is no linear Granger causality relationship running from the BDI to GEPU.

• There is no nonlinear Granger causality relationship between the BDI and GEPU.

• The linear Granger causality relationship between the BDI and GEPU is time-varying.

Acknowledgments

We acknowledge the financial support from the Natural Science Foundation of Anhui Province, China (granted no. 1808085MA02), Scientific Research Fund for High-level Personnel of Bengbu University, China (granted no. BBXY2018KYQD28), and Key Scientific Research Program of Bengbu University, China (granted no. 2020ZR05zd) .

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ These information is obtained from http://www.policyuncertainty.com. The detailed information on GEPU data is available from this website. We thank the anonymous referee’s helpful advice.

² We also conduct the nonlinear Granger causality tests for the values of $l_x=l_y$ from 2 to 8 and obtain similar results, which are available on request.

³ We appreciate the anonymous referee’s helpful suggestion.

Additional information

Funding

This work was supported by the Scientific Research Fund for High-level Personnel of Bengbu University, China [BBXY2018KYQD28]; Natural Science Foundation of Anhui Province, China [1808085MA02]; Key Scientific Research Program of Bengbu University, China [2020ZR05zd].