Impact of Geopolitical, Economic Policy and Financial Market Uncertainty on the Realized Volatility of G20 Stock Indices: A Panel QARDL Approach
DOI:
https://doi.org/10.47743/saeb-2025-0040Keywords:
uncertainty, geopolitical risk, economic policy uncertainty, quantile model, Panel ECM.Abstract
Amid rising uncertainties, the researcher uses the novel panel quantile autoregressive distributive lag approach to examine the long- and short-term effects of geopolitical, economic policy and financial market uncertainties on the realized volatility of G20 stock indices from April 2015 to March 2024. The findings indicate that overall geopolitical risk (GPR) and geopolitical acts (GPA) have a significant impact on the realized volatility of G20 stock indices but only in the long run, while country-specific GPR (GPRH) has an insubstantial impact across all three quantiles. Conversely, an adverse effect of Global Economic Policy (GEPU) has been observed only in the short run. Among financial market uncertainty proxies, the market-based fear index (VIX) has a more pronounced impact than the news-based fear index on overall economic market volatility (EMV). Resilience has been noticed against GPRH, geopolitical threats (GPT) and GEPU, indicating their potential as diversifiers and hedges. Furthermore, the Pairwise Granger Panel Causality Test reveals interconnections among different uncertainty types. The long-term vulnerability to GPR and GPA suggests a decline in international risk diversification benefits due to increasing geopolitical tensions. The policymakers are thus urged to enhance efforts to mitigate geopolitical conflicts and maintain global economic and financial interconnectedness.
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