Does Economic Policy Uncertainty Affect Exchange Rate in China and Japan? Evidence from Threshold Cointegration with Asymmetric Adjustment

Authors

  • Riadh El Abed Laboratoire d’Ingénierie Financière et Economique (LIFE), 65 Rue Ibn Sina, Moknine 5050, Tunisia
  • Zouheir Mighri Department of Finance and Insurance, Saudi Arabia, College of Business, University of Jeddah, Saudi Arabia
  • Abderrazek Ben Hamouda Faculty of Economics and Management of Tunis, University of Tunis El Manar, Tunisia.

DOI:

https://doi.org/10.32479/ijefi.11973

Abstract

In this article, we estimate the links between nominal exchange rates (JPY/USD and CNY/USD) and economic policy uncertainty (EPU) in China and Japan by employing monthly data during the period span from January 1997 to September 2020. The threshold cointegration approach focus in TAR, M-TAR, C-TAR and C-MTAR is used. Results indicate the evidence of asymmetric effect in the adjustment process to equilibrium and the M-TAR is the best model to detect threshold effect for the (CNY/USD-CNYEPU) pair and the C-TAR is the best model to detect threshold effect for the (JPY/USD-JPYEPU) pair.

 

Keywords:

Foreign Exchange Rate, Economic Policy Uncertainty, Nonlinear Cointegration, Asymmetric ECM

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Published

2022-01-11

How to Cite

El Abed, R., Mighri, Z., & Hamouda, A. B. (2022). Does Economic Policy Uncertainty Affect Exchange Rate in China and Japan? Evidence from Threshold Cointegration with Asymmetric Adjustment. International Journal of Economics and Financial Issues, 12(1), 28–36. https://doi.org/10.32479/ijefi.11973

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Articles