Policy Uncertainty in China, Oil Shocks and Stock Returns

Wensheng Kang and Ronald Ratti

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper examines the interdependence of China’s policy uncertainty, the global oil market, and stock market returns in China. A structural VAR model is estimated that shows a positive shock to economic policy uncertainty in China has a delayed negative effect on global oil production, real oil prices and real stock market returns. Shocks to oil market specific demand significantly raise China’s economic policy uncertainty and reduce the real stock market returns. As measured by a spillover index the interdependence between these variables is rising since 2003 as China’s influence in the oil market increases. An equivalent spillover index calculated for the U.S. is smaller and largely flat over time.

Keywords: China’s policy uncertainty; China’s stock market return; Oil shocks; Structural VAR (search for similar items in EconPapers)
JEL-codes: E44 G15 P40 Q43 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-04
New Economics Papers: this item is included in nep-ene, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2014-32

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