The international spillover effects of US Quality of Political Signals: A Global VAR approach

Hammed, Yinka S and Salisu, Afees and Akume, Michael (2025): The international spillover effects of US Quality of Political Signals: A Global VAR approach. Forthcoming in: : pp. 1-46.

Abstract

We investigate the influence of US quality of political signals (USQPOLS) on advanced and emerging markets using the Global Vector Autoregressive (GVAR) model that also accommodates the macroeconomic conditions of the shock recipient markets. We show an immediate negative impact on the equity markets with about 1.5% response to a 1 standard deviation shock due to the USQPOLS. However, we find impulse responses that transcend the immediate period for the high and low quality of political signals, albeit with contrasting evidence. Additional evidence involving Global Economic Policy Uncertainty (GEPU) suggests a direct and instantaneous effect on real equity prices. We are able to trace our evidence to the exchange rate channel and document important implications for policy and practice.

• Item Type: MPRA Paper
• Language: English
• Keywords: Political signals, International Equity Markets, Global Vector Autoregressive Model, Impulse Responses
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; P - Economic Systems > P0 - General > P00 - General

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