Research Article
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The examination of the impact of global uncertainties on developed and developing markets with structural VAR model

Year 2024, Volume: 7 Issue: 2, 122 - 134, 27.08.2024
https://doi.org/10.58308/bemarej.1515805

Abstract

This study aims to examine the impact of global uncertainties on developed and developing markets with the help of the Structural VAR model. Due to the integration of financial markets, it is of great importance for securities market investors to be able to predict the direction of the markets. One of the variables to be used to predict the development of financial markets is the MSCI indices. In the study, the Developed Markets Index (MSCIWO) was used to represent developed markets, and the MSCIEF Emerging Markets Index was used to represent emerging markets. In the study, two separate models were established to measure the impact of global uncertainties on developed and developing markets. Using monthly data from 2014-2023, this study identifies differences between developed and emerging markets and shows how these markets react to different types of uncertainty. The results obtained from the study show that the effect of the Global Economic Policy Uncertainty Index (GEPU) variable on developed and developing capital markets is positive in the long term. Additionally, it was determined that the Geopolitical Risk Index (GPR) variable has a long-term negative impact on both markets. Analysis results indicate that the effect of the VIX variable on advanced markets is not significant, whereas it shows a negative impact on developing markets.

References

  • Altig, D., Baker, S., Barrero, J. M., Bloom, N., Bunn, P., Chen, S., Davis, S. J., Leather, J., Meyer, B., Mihaylov, E., Mizen, P., Parker, N., Renault, T., Smietanka, P., & Thwaites, G. (2020). Economic uncertainty before and during the COVID-19 pandemic. Journal of public economics, 191, 104274. https://doi.org/10.1016/j.jpubeco.2020.104274
  • An, X., Wu, B., Dedahanov, A. T., & Sun, W. (2022) Episodes of extreme international capital inflows in emerging and developing economies: The role of global economic policy uncertainty. PLoS ONE, 17(9), e0275249. https://doi.org/10.1371/journal.pone.0275249.
  • Apaitan, T., Luangaram, P., & Manopimoke, P. (2022). Uncertainty in an emerging market economy: Evidence from Thailand. Empirical economics, 62(3), 933-989. https://doi.org/10.1007/s00181-021-02054-y
  • Ashley, R. A., & Verbrugge, R. J. (2009). To difference or not to difference: A monte carlo investigation of inference in vector autoregression models. International Journal of Data Analysis Techniques and Strategies, 1(3), 242-274.
  • Aslan, Ç., & Açıkgöz, Ş. (2023). Are the global economic policy uncertainties blocking the export flows of emerging markets? A heterogeneous panel SVAR analysis. Economic Journal of Emerging Markets, 15(1), 87-100. https://doi.org/10.20885/ejem.vol15.iss1.art7
  • Assaf, A., Charif , H., & Mokni, K. (2021). Dynamic connectedness between uncertainty and energy markets: Do investor sentiments matter? Resources Policy, 72, 102112. https://doi.org/10.1016/j.resourpol.2021.102112
  • Bachmann, R., Elstner, S., & Sims, E. (2013). Uncertainty and economic activity: Evidence from business survey data. American Economic Journal: Macroeconomics, 5, 217-49.
  • Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. Quarterly Journal of Economics, 131, 1593-1636.
  • Basu, S., & Bundick, B. (2017). Uncertainty shocks in a model of effective demand. Econometrica, 85, 937-958.
  • Bekaert, G., Hoerova, M., & Duca, M. L. (2013). Risk, uncertainty and monetary policy. Journal of Monetary Economics, 60, 771-788.
  • Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77, 623-685.
  • Bossman, A., & Gubareva, M. (2023). Asymmetric impacts of geopolitical risk on stock markets: A comparative analysis of the E7 and G7 equities during the Russian-Ukrainian conflict. Heliyon, 9(2), e13626. https://doi.org/10.1016/j.heliyon.2023.e13626
  • Caggiano, G., Castelnuovo, E., & Groshenny, N. (2014). Uncertainty shocks and unemployment dynamics in U.S. recessions. Journal of Monetary Economics, 67, 78-92.
  • Caldara, D., & Iacoviello, M. (2018). Measuring geopolitical risk. International Finance Discussion Papers, 1222, 1-47.
  • Caldara, D., & Iacoviello, M. (2022). Measuring geopolitical risk. American Economic Review, 112, 1194-1225.
  • Chang, C.-L., Hsieh, T.-L., & McAleer, M. (2018). Connecting VIX and stock index ETF with VAR and diagonal BEKK. Journal of Risk and Financial Management, 11(4), 58. https://doi.org/10.3390/jrfm11040058
  • Davis, S. J. (2016). An index of global economic policy uncertainty (No. w22740). Cambridge: National Bureau of Economic Research.
  • Fernández-Villaverde, J., Guerrón-Quintana, P., Kuester, K., & Rubio-Ramírez, J. (2015). Fiscal volatility shocks and economic activity. American Economic Review, 105, 3352-84.
  • Fossung, G. A., Vovas, V. C., & Quoreshi, A. M. M. S. (2021). Impact of geopolitical risk on the information technology, communication services and consumer staples sectors of the S&P 500 index. Journal of Risk and Financial Management, 14(11), 552. https://doi.org/10.3390/jrfm14110552.
  • Fountain, R. L., Herman, J. J. R., & Rustvold, D. L. (2008). An application of kendall distributions and alternative dependence measures: SPX vs. VIX. Insurance. Mathematics and Economics, 42(2), 469-472.
  • Ghani, M., & Ghani, U. (2024). Economic policy uncertainty and emerging stock market volatility. Asia-Pacific Financial Markets, 31(1) 165-181. https://doi.org/10.1007/s10690-023-09410-1
  • Gujarati, D. N., & Porter, D. C. (2012). Temel Ekonometri. (Çev: Ü. Şenesen ve G. G. Şenesen), Literatür Yayınları.
  • Jurado, K., Ludvigson, S. C., & Ng, S. (2015). Measuring uncertainty. American Economic Review, 105(3), 1177-1216.
  • Kang, W., Ratti, R. A., & Vespignani, J. (2020). Impact of global uncertainty on the global economy and large developed and developing economies. Applied Economics, 52(22), 2392-2407. https://doi.org/10.1080/00036846.2019.1690629
  • Kara, H. T., Ceylan, N. B., & Kapusuzoglu, A. (2020). Global economic policy uncertainty as a main driver of financial ımpacts and performances in the financial markets: evidence from emerging market economies. In: Dincer, H., Yüksel, S. (eds) Strategic Outlook for Innovative Work Behaviours. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-030-50131-0_3.
  • Korkmaz, Ö., & Güngör, S. (2018). Küresel ekonomi politika belirsizliğinin borsa istanbul’da işlem gören seçilmiş endeks getirileri üzerindeki etkisi. Muş Alparslan Üniversitesi Sosyal Bilimler Dergisi, 6, 211-219.
  • Kyriazis, Ν. A. (2021). The effects of geopolitical uncertainty on cryptocurrencies and other financial assets. SN Bus Econ., 1, 5. https://doi.org/10.1007/s43546-020-00007-8.
  • Lai, F., Li, S., Lv, L., & Zhu, S. (2023). Do global geopolitical risks affect connectedness of global stock market contagion network? Evidence from quantile-on-quantile regression. Front. Phys., 11, 1124092. http://dx.doi.org/10.3389/fphy.2023.1124092
  • Lanzilotta, B., Merlo, G., Mordecki, G., & Umpierrez, V. (2023). Understanding uncertainty shocks in uruguay through var modeling. Journal of Business Cycle Research, 1-21. https://doi.org/10.1007/s41549-023-00081-5
  • Leduc, S., & Liu, Z. (2016). Uncertainty shocks are aggregate demand shocks. Journal of Monetary Economics, 82, 20-35.
  • Llosa, L. G., Forero, F. J. P., & Tuesta, V. (2022). Uncertainty shocks and financial regimes in emerging markets. October 2022. Conference: Working Papers 2022-009, Banco Central de Reserva del Perú. At: Banco Central de Reserva del Perú.
  • Miescu, M. S. (2019). Uncertainty shocks in emerging economies. Working Papers 277077821, Lancaster University Management School, Economics Department.
  • Miescu, M. S. (2022). Uncertainty shocks in emerging economies: A global to local approach for identification. https://ssrn.com/abstract=4176889 or http://dx.doi.org/10.2139/ssrn.4176889
  • Nam, N. H., Dinh, D. D., Yen, N. T., Vinh, D. Q., & Tung, N. T. (2023). The impact of geopolitical risk on financial assets: Evidence from time-varying parameter var. VNU University of Economics and Business, 3(4), 33. https://doi.org/10.57110/vnujeb.v3i4.202.
  • Pedroni, P. (2013). Structural panel VARs, Econometrics, (2), 80-206.
  • Pfaff, B. (2008). VAR, SVAR and SVEC models: Implementation within R package vars. Journal of Statistical Software, 27(4), 1-32.
  • Plakandaras, V., Gogas, P., & Papadimitriou, T. (2023). The effects of geopolitical uncertainty in forecasting financial markets: A machine learning approach (October 24, 2023). Available at SSRN: https://ssrn.com/abstract=4611274 or http://dx.doi.org/10.2139/ssrn.4611274.
  • Rubio-Ramirez, J., Waggoner, D., & Zha, T. T. (2010). Structural vector autoregressions: theory of ıdentification and algorithms for ınference. Review of Economic Studies, 77(2), 665–696.
  • Salisu, Afees A., Gupta, R. & Demirer, R. (2022). Oil price uncertainty shocks and global equity markets: evidence from a gvar model. Journal of Risk and Financial Management, 15(8), 355. https://doi.org/10.3390/jrfm15080355
  • Shaik, M., Jamil, S. A., Hawaldar, I. T., Sahabuddin, M., Rabbani, M. R., & Atif, M. (2023). Impact of geo-political risk on stocks, oil, and gold returns during GFC, COVID-19, and Russian – Ukraine War. Cogent Economics & Finance, 11(1). https://doi.org/10.1080/23322039.2023.2190213.
  • Sims, C. A. (1980). Macroeconomics and reality. Econometrica. Journal of the Econometric Society, 48(1), 1-48.
  • Sims, C. A. (1986). Are forecasting models usable for policy analysis?. Quarterly Review, (Win), 2-16.
  • Trung, N. B. (2019). The spillover effect of the US uncertainty on emerging economies: a panel VAR approach. Applied Economics Letters, 26(3), 210-216. https://doi.org/10.1080/13504851.2018.1458183.
  • Vuong, G. T. H., Nguyen, M. H., & Keung Wong, W. (2022). CBOE volatility index (VIX) and corporate market leverage. Cogent Economics & Finance, 10(1). https://doi.org/10.1080/23322039.2022.2111798.
  • Whaley, R. E. (2000). The investor fear gauge. Journal of Portfolio Management, 26, 12-17.
  • Zhou, Y., Liu, Z., & Wu, S. (2022). The global economic policy uncertainty spillover analysis: In the background of COVID-19 pandemic. Research in international business and finance, 61, 101666. https://doi.org/10.1016/j.ribaf.2022.101666

Global belirsizliklerin gelişmiş ve gelişmekte olan piyasalara etkisinin yapısal VAR modeli ile incelenmesi

Year 2024, Volume: 7 Issue: 2, 122 - 134, 27.08.2024
https://doi.org/10.58308/bemarej.1515805

Abstract

Bu çalışmanın amacı global belirsizliklerin gelişmiş ve gelişmekte olan piyasalara etkisini Yapısal VAR modeli yardımıyla incelemektedir. Finansal piyasalardaki entegrasyon sebebiyle, menkul kıymet piyasası yatırımcıları için piyasaların yönünü tahmin edebilmek büyük öneme sahiptir. Finansal piyasaların gelişimini tahmin etmede kullanılacak değişkenlerden biriside MSCI endeksleridir. Çalışmada gelişmiş piyasaları temsilen Gelişmiş Piyasalar endeksi (MSCIWO), gelişmekte olan piyasaları temsilen MSCIEF Gelişmekte Olan Piyasalar Endeksi kullanılmıştır. Çalışmada global belirsizliklerin, gelişmiş ve gelişmekte olan piyasalara etkisini ölçebilmek amacıyla iki ayrı model kurulmuştur. 2014-2023 aylık verilerin kullanıldığı bu çalışma gelişmiş ve gelişmekte olan piyasalar arasındaki farklılıkları belirlemekte ve bu piyasaların farklı belirsizlik türleri karşısında nasıl tepki verdiğini göstermektedir. Çalışmadan elde edilen sonuçlar, Küresel Ekonomik Politika Belirsizliği Endeksi (GEPU) değişkeninin gelişmiş ve gelişmekte olan sermaye piyasalarına etkisinin uzun dönemde pozitif olduğunu göstermektedir. Bununla birlikte Jeopolitik Risk Endeksi (GPR) değişkeninin her iki piyasaya olan etkisinin uzun dönemde negatif olduğu tespit edilmiştir. Analiz sonuçları VIX değişkeninin gelişmiş piyasalara olan etkisinin anlamlı olmadığını gelişmekte olan piyasalara etkisinin ise negatif olduğunu göstermiştir.

References

  • Altig, D., Baker, S., Barrero, J. M., Bloom, N., Bunn, P., Chen, S., Davis, S. J., Leather, J., Meyer, B., Mihaylov, E., Mizen, P., Parker, N., Renault, T., Smietanka, P., & Thwaites, G. (2020). Economic uncertainty before and during the COVID-19 pandemic. Journal of public economics, 191, 104274. https://doi.org/10.1016/j.jpubeco.2020.104274
  • An, X., Wu, B., Dedahanov, A. T., & Sun, W. (2022) Episodes of extreme international capital inflows in emerging and developing economies: The role of global economic policy uncertainty. PLoS ONE, 17(9), e0275249. https://doi.org/10.1371/journal.pone.0275249.
  • Apaitan, T., Luangaram, P., & Manopimoke, P. (2022). Uncertainty in an emerging market economy: Evidence from Thailand. Empirical economics, 62(3), 933-989. https://doi.org/10.1007/s00181-021-02054-y
  • Ashley, R. A., & Verbrugge, R. J. (2009). To difference or not to difference: A monte carlo investigation of inference in vector autoregression models. International Journal of Data Analysis Techniques and Strategies, 1(3), 242-274.
  • Aslan, Ç., & Açıkgöz, Ş. (2023). Are the global economic policy uncertainties blocking the export flows of emerging markets? A heterogeneous panel SVAR analysis. Economic Journal of Emerging Markets, 15(1), 87-100. https://doi.org/10.20885/ejem.vol15.iss1.art7
  • Assaf, A., Charif , H., & Mokni, K. (2021). Dynamic connectedness between uncertainty and energy markets: Do investor sentiments matter? Resources Policy, 72, 102112. https://doi.org/10.1016/j.resourpol.2021.102112
  • Bachmann, R., Elstner, S., & Sims, E. (2013). Uncertainty and economic activity: Evidence from business survey data. American Economic Journal: Macroeconomics, 5, 217-49.
  • Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. Quarterly Journal of Economics, 131, 1593-1636.
  • Basu, S., & Bundick, B. (2017). Uncertainty shocks in a model of effective demand. Econometrica, 85, 937-958.
  • Bekaert, G., Hoerova, M., & Duca, M. L. (2013). Risk, uncertainty and monetary policy. Journal of Monetary Economics, 60, 771-788.
  • Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77, 623-685.
  • Bossman, A., & Gubareva, M. (2023). Asymmetric impacts of geopolitical risk on stock markets: A comparative analysis of the E7 and G7 equities during the Russian-Ukrainian conflict. Heliyon, 9(2), e13626. https://doi.org/10.1016/j.heliyon.2023.e13626
  • Caggiano, G., Castelnuovo, E., & Groshenny, N. (2014). Uncertainty shocks and unemployment dynamics in U.S. recessions. Journal of Monetary Economics, 67, 78-92.
  • Caldara, D., & Iacoviello, M. (2018). Measuring geopolitical risk. International Finance Discussion Papers, 1222, 1-47.
  • Caldara, D., & Iacoviello, M. (2022). Measuring geopolitical risk. American Economic Review, 112, 1194-1225.
  • Chang, C.-L., Hsieh, T.-L., & McAleer, M. (2018). Connecting VIX and stock index ETF with VAR and diagonal BEKK. Journal of Risk and Financial Management, 11(4), 58. https://doi.org/10.3390/jrfm11040058
  • Davis, S. J. (2016). An index of global economic policy uncertainty (No. w22740). Cambridge: National Bureau of Economic Research.
  • Fernández-Villaverde, J., Guerrón-Quintana, P., Kuester, K., & Rubio-Ramírez, J. (2015). Fiscal volatility shocks and economic activity. American Economic Review, 105, 3352-84.
  • Fossung, G. A., Vovas, V. C., & Quoreshi, A. M. M. S. (2021). Impact of geopolitical risk on the information technology, communication services and consumer staples sectors of the S&P 500 index. Journal of Risk and Financial Management, 14(11), 552. https://doi.org/10.3390/jrfm14110552.
  • Fountain, R. L., Herman, J. J. R., & Rustvold, D. L. (2008). An application of kendall distributions and alternative dependence measures: SPX vs. VIX. Insurance. Mathematics and Economics, 42(2), 469-472.
  • Ghani, M., & Ghani, U. (2024). Economic policy uncertainty and emerging stock market volatility. Asia-Pacific Financial Markets, 31(1) 165-181. https://doi.org/10.1007/s10690-023-09410-1
  • Gujarati, D. N., & Porter, D. C. (2012). Temel Ekonometri. (Çev: Ü. Şenesen ve G. G. Şenesen), Literatür Yayınları.
  • Jurado, K., Ludvigson, S. C., & Ng, S. (2015). Measuring uncertainty. American Economic Review, 105(3), 1177-1216.
  • Kang, W., Ratti, R. A., & Vespignani, J. (2020). Impact of global uncertainty on the global economy and large developed and developing economies. Applied Economics, 52(22), 2392-2407. https://doi.org/10.1080/00036846.2019.1690629
  • Kara, H. T., Ceylan, N. B., & Kapusuzoglu, A. (2020). Global economic policy uncertainty as a main driver of financial ımpacts and performances in the financial markets: evidence from emerging market economies. In: Dincer, H., Yüksel, S. (eds) Strategic Outlook for Innovative Work Behaviours. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-030-50131-0_3.
  • Korkmaz, Ö., & Güngör, S. (2018). Küresel ekonomi politika belirsizliğinin borsa istanbul’da işlem gören seçilmiş endeks getirileri üzerindeki etkisi. Muş Alparslan Üniversitesi Sosyal Bilimler Dergisi, 6, 211-219.
  • Kyriazis, Ν. A. (2021). The effects of geopolitical uncertainty on cryptocurrencies and other financial assets. SN Bus Econ., 1, 5. https://doi.org/10.1007/s43546-020-00007-8.
  • Lai, F., Li, S., Lv, L., & Zhu, S. (2023). Do global geopolitical risks affect connectedness of global stock market contagion network? Evidence from quantile-on-quantile regression. Front. Phys., 11, 1124092. http://dx.doi.org/10.3389/fphy.2023.1124092
  • Lanzilotta, B., Merlo, G., Mordecki, G., & Umpierrez, V. (2023). Understanding uncertainty shocks in uruguay through var modeling. Journal of Business Cycle Research, 1-21. https://doi.org/10.1007/s41549-023-00081-5
  • Leduc, S., & Liu, Z. (2016). Uncertainty shocks are aggregate demand shocks. Journal of Monetary Economics, 82, 20-35.
  • Llosa, L. G., Forero, F. J. P., & Tuesta, V. (2022). Uncertainty shocks and financial regimes in emerging markets. October 2022. Conference: Working Papers 2022-009, Banco Central de Reserva del Perú. At: Banco Central de Reserva del Perú.
  • Miescu, M. S. (2019). Uncertainty shocks in emerging economies. Working Papers 277077821, Lancaster University Management School, Economics Department.
  • Miescu, M. S. (2022). Uncertainty shocks in emerging economies: A global to local approach for identification. https://ssrn.com/abstract=4176889 or http://dx.doi.org/10.2139/ssrn.4176889
  • Nam, N. H., Dinh, D. D., Yen, N. T., Vinh, D. Q., & Tung, N. T. (2023). The impact of geopolitical risk on financial assets: Evidence from time-varying parameter var. VNU University of Economics and Business, 3(4), 33. https://doi.org/10.57110/vnujeb.v3i4.202.
  • Pedroni, P. (2013). Structural panel VARs, Econometrics, (2), 80-206.
  • Pfaff, B. (2008). VAR, SVAR and SVEC models: Implementation within R package vars. Journal of Statistical Software, 27(4), 1-32.
  • Plakandaras, V., Gogas, P., & Papadimitriou, T. (2023). The effects of geopolitical uncertainty in forecasting financial markets: A machine learning approach (October 24, 2023). Available at SSRN: https://ssrn.com/abstract=4611274 or http://dx.doi.org/10.2139/ssrn.4611274.
  • Rubio-Ramirez, J., Waggoner, D., & Zha, T. T. (2010). Structural vector autoregressions: theory of ıdentification and algorithms for ınference. Review of Economic Studies, 77(2), 665–696.
  • Salisu, Afees A., Gupta, R. & Demirer, R. (2022). Oil price uncertainty shocks and global equity markets: evidence from a gvar model. Journal of Risk and Financial Management, 15(8), 355. https://doi.org/10.3390/jrfm15080355
  • Shaik, M., Jamil, S. A., Hawaldar, I. T., Sahabuddin, M., Rabbani, M. R., & Atif, M. (2023). Impact of geo-political risk on stocks, oil, and gold returns during GFC, COVID-19, and Russian – Ukraine War. Cogent Economics & Finance, 11(1). https://doi.org/10.1080/23322039.2023.2190213.
  • Sims, C. A. (1980). Macroeconomics and reality. Econometrica. Journal of the Econometric Society, 48(1), 1-48.
  • Sims, C. A. (1986). Are forecasting models usable for policy analysis?. Quarterly Review, (Win), 2-16.
  • Trung, N. B. (2019). The spillover effect of the US uncertainty on emerging economies: a panel VAR approach. Applied Economics Letters, 26(3), 210-216. https://doi.org/10.1080/13504851.2018.1458183.
  • Vuong, G. T. H., Nguyen, M. H., & Keung Wong, W. (2022). CBOE volatility index (VIX) and corporate market leverage. Cogent Economics & Finance, 10(1). https://doi.org/10.1080/23322039.2022.2111798.
  • Whaley, R. E. (2000). The investor fear gauge. Journal of Portfolio Management, 26, 12-17.
  • Zhou, Y., Liu, Z., & Wu, S. (2022). The global economic policy uncertainty spillover analysis: In the background of COVID-19 pandemic. Research in international business and finance, 61, 101666. https://doi.org/10.1016/j.ribaf.2022.101666
There are 46 citations in total.

Details

Primary Language English
Subjects Business Administration
Journal Section Research Article
Authors

Özge Demirkale 0000-0002-4227-3934

Publication Date August 27, 2024
Submission Date July 13, 2024
Acceptance Date August 27, 2024
Published in Issue Year 2024 Volume: 7 Issue: 2

Cite

APA Demirkale, Ö. (2024). The examination of the impact of global uncertainties on developed and developing markets with structural VAR model. Business Economics and Management Research Journal, 7(2), 122-134. https://doi.org/10.58308/bemarej.1515805

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