Empirical Study Of The Relationship Between Economic Policy Uncertainty And Financial Systemic Risk

The financial crisis of 2007–2009 has made the impacts of systemic risk a focal point of researchers and policy makers.However,there is no sufficient literature studying on the relationship between the uncertainty across real economy and financial system,and whether the interaction depends on economy scenarios.This paper investigates the relationship between EPU and CISS,which are powerful proxies of economic uncertainty and financial systemic risk,by fitting DCC-GARCH models and quantile regression models.According to the empirical results,the time-varying correlations of the two index differ among countries,and have potential structural breaks around crisis periods.The correlations between categorized EPUs and CISS show that although different aspects of economic policy response diversely to the impulse from financial systemic risk,they present similar features with the comprehensive index.EPU and CISS Granger cause each other in quantiles,and when the degree of uncertainty goes higher,the causal effects become greater.At tail quantile pairs,these effects are asymmetric.