Research On The Impact Of Economic Policy Uncertainty On Exchange Rate Market

In the context of the frequent economic crisis,governments around the world have stepped up their intervention in financial market activities,and the problem of the impact of economic policy uncertainty on the exchange rate market has become more and more significant.At the same time,with the continuous advancement of China's RMB internationalization process,the relation between China's exchange rate market and other countries' exchange rate markets has become closer.Therefore,studying the impact of economic policy uncertainty on China's exchange rate market,on the one hand,it is necessary to consider the impact of policy uncertainty in different countries on China's exchange rate market,on the other hand,we need to further clarify the impact of economic policy uncertainty on the correlation between exchange rate markets between China and other countries.Firstly,this paper takes Brazil,South Korea,the United States,the Eurozone,Japan and China as samples,based on the data of EPU index and real effective exchange rate from January 2003 to December 2018,constructs a restricted panel vector autoregressive(PVAR-SSSS)model based on Bayesian estimation,and analyzes the influence mechanism of a country's economic policy uncertainty on the exchange rate market.The research results show that,in the context of policy spillovers,economic policy uncertainty has a significant negative impact on China's exchange rate market,and this negative impact has obvious persistence.In addition,from the perspective of policy spillover effects in different countries,the degree of economic policy uncertainty in different countries has different impacts on China's exchange rate market.Then,this paper selects the SDR exchange rate and EPU index data of China and the United States from January 1999 to December 2018,and constructs a DCC-GARCHWAVELET two-stage model to examine the impact of economic policy uncertainty on the correlation between the Chinese exchange rate market and American exchange rate market from the time and frequency domain.The research results show that,Firstly,economic policy uncertainty has a significant negative impact on the correlation between the China and US exchange rate markets.Secondly,the negative impact of economic policy uncertainty on the correlation of exchange rate markets is inconsistent in different frequency domains,and the impact is more significant in the long run.Thirdly,the uncertainty of the economic policy of China and the United States has different effects on the correlation between the exchange rate markets of the two countries.The conclusions of this paper have important significance for the healthy and healthy development of China's exchange rate market.At the same time,it provides a new perspective and theoretical reference for the government to formulate policies and institutions in the process of promoting the internationalization of the RMB,and it also provides a certain reference value for investors to optimize the allocation of assets and risk avoidance.