Impacts of Economic Policy Uncertainty on Stock market and Bond Market in Mainland China
In this paper, we introduce the economic policy uncertainty as an exogenous variable in VAR-BEKK-GARCH model to examine whether and how the returns, variances and covariance of the stock market and bond market are influenced by economic policy uncertainty in mainland China from January 2003 to July 2018. The empirical results show that economic policy uncertainty leads to the negative impacts on stock returns and stock-bond covariance, but exerts the positive effects on the bond market returns and stock market volatility. Moreover, economic policy uncertainty affects more on the stock market returns than the bond market returns.
Index terms - Bond market, Economic policy uncertainty, Mainland China, Stock market, VAR-BEKK-GARCH