Empirical Research On The Correlation Between Chinese Economic Policy Uncertainty And Crude Oil Price

Since the outbreak of the financial crisis in 2008,the global economic integration and the linkage between the financial markets in the world can be reflected.Governments have introduced economic policies in order to avoid an economic collapse recession or overheating expansion.although to some certain extent,to maintain the stability of financial markets,but frequent government intervention in the economy has brought the economic policy uncertainty(EPU).Economic policy uncertainty increases the difficulty of investors and enterprises expectations of the future investment environment,making the public confidence index down,thus affecting the investment of enterprises and individuals,leading to economic downturn,which has had a negative impact on economic growth.Numerous studies have shown that economic policies uncertainty can have an impact on the real economy,including GDP,consumption,investment and exports,but also affect the price variables,such as exchange rates,stock prices,real estate prices,etc..Therefore,it is particularly important to study the factors that affect the economic policy uncertainty.Based on Jones and Olson(2013)study,we found that There is a certain correlation between oil price and the economic policy uncertainty index.Therefore,this paper studies the dynamic correlation between China’s crude oil price yield and Barker’s economic policy uncertainty index.Identify the factors that affect the economic policy uncertainty.Through the Granger causality test,we find that the crude oil yield is a one-way Granger reason for economic policy uncertainty.The results show that the fluctuation of crude oil price is the cause of the increase of economic policy uncertainty.At the same time,based on the DCC-GARCH model,it is found that there is a two-way volatility spillover effect between crude oil price yield and economic policy uncertainty index.Therefore,economic policy uncertainty depends on the impact of crude oil price.In summing up the conclusions of the study,combined with the actual situation in China,we put forward the corresponding policy recommendations:the government should pay close attention to the volatility of crude oil prices,and actively take effective measures to prevent the crude oil prices rose sharply or drop sharply,to maintain the sustained and stable operation of economic policy.The results also provide more information for the public to make reasonable expectations.Therefore,the public is expected in the future investment environment,also pay close attention to the volatility of crude oil prices,take measures in advance to prepare to deal with the effects of the government’s economic policy on the investment environment,adjust the investment strategy to reduce the risk of investment.