Economic Policy Uncertainty and Stock Market Volatility: A Causality Check

Using causal graphs, this paper develops a simple check to uncover the direction of the causal link between economic policy uncertainty and stock market volatility. The check is applied to monthly data for 22 countries. The results imply that uncertainty is an instantaneous cause of stock market volatility. Estimates suggest that stock market volatility increases by 0.15% to 0.85% after a 1% increase in economic policy uncertainty.

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Year of publication:	2021
Authors:	Raunig, Burkhard
Publisher:	Vienna : Oesterreichische Nationalbank (OeNB)
Subject:	Causal inference \| Causal graph \| Economic policy uncertainty \| Stock market volatility

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Series:	Working Paper ; 234
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	1759925144 [GVK] hdl:10419/264826 [Handle] RePEc:onb:oenbwp:234 [RePEc]
Classification:	C12 - Hypothesis Testing ; D80 - Information and Uncertainty. General ; E66 - General Outlook and Conditions ; G10 - General Financial Markets. General
Source:	EconStor

Persistent link: https://www.econbiz.de/10013370151