A Study On Economic Policy Uncertainty’s International Impacts Based On BRIC

In the current international environment,economic policy uncertainty has become a stumbling block for the economic development of all countries in the world.As the largest emerging market in the world,the economic development model of BRICS countries has attracted much attention,and the stock market is considered as a barometer to reflect the macroeconomic situation.In this context,it is necessary to systematically and thoroughly study the impact of BRICS economic policy uncertainty,including the impact of economic policy uncertainty on BRICS stock market and the relationship between economic policy uncertainty.This not only can effectively analyze the correlation of BRICS economic policy uncertainties,but also has great significance for improving the efficiency of national decisionmaking.This paper reviews the concepts and related theories of economic policy uncertainty,as well as the economic and stock market background of BRICS countries.After a detailed literature review,it is pointed out that there are still two issues worth studying: first,it is necessary to examine whether there is spillover effect between the economic policy uncertainty of BRICS countries;second,it is necessary to examine the economies of BRICS countries.The impact of economic policy uncertainty on domestic stock market,and whether each country’s economic policy uncertainty will also have transnational impact on the stock market of other countries in the organization.To this end,this paper uses the Economic Policy Uncertainty(EPU)index compiled by Baker et al.(2016)and the stock market data of BRICS countries(Shanghai Composite Index,Russian RTS Index,IBOVESPA Index of Sao Paulo,Brazil,SENSEX 30 Index of Mumbai)to carry out empirical analysis in the following three aspects:Finally,based on SVAR model,the spillover effect among BRICS economic policy uncertainty indices is analyzed.The results show that China’s economic policy uncertainty has a strong external spillover effect,which will have a strong impact on the economic policy uncertainty of Brazil and Russia,indicating that China is the main exporter of the BRICS countries with uncertain economic policies,which also reflects China’s strong influence.This is mainly because China is the main trading target country,China is the main importer of many commodities,and China has invested a lot in infrastructure in emerging economies such as Brazil and Russia.Secondly,in order to analyze the impact of economic policy uncertainty on the volatility of BRICS stock market,this paper introduces the mixed-frequency data model GARCH-MIDAS to decompose the volatility of BRICS stock market into long-term and short-term components.Because the uncertainty index of economic policy is monthly data and the stock market data is daily data,we try to avoid the loss of information caused by data frequency reduction.The results show that the long-term component of the fluctuation is relatively more gentle,and the short-term component changes around the long-term component.The long-term volatility component is consistent with the data frequency of economic policy uncertainty index,and intuitively shows that the change of long-term volatility may be related to economic policy uncertainty.Finally,we use the panel regression model with variable coefficients to analyze the long-term effects of BRICS economic policy uncertainty on domestic and transnational stock market volatility.The results show that the uncertainties of economic policies in China and Russia will affect the volatility of their stock markets.The uncertainties of economic policies in Brazil and India have no significant impact on the volatility of their stock markets,which is mainly related to the characteristics of BRICS stock markets.Then,this paper uses panel model to analyze the interaction between BRICS economic policy uncertainty and China’s economic policy uncertainty on the impact of BRICS stock market volatility.The study finds that for Brazil and Russia,the interaction between economic policy uncertainty and China’s economic policy uncertainty will affect the volatility of their stock market.This once again confirms China’s influence in the BRIC countries.At the end of the article,this paper summarizes the important conclusions and puts forward some suggestions on this basis.