Information Flow Analysis between EPU and Other Financial Time Series

Can-Zhong Yao
2020 Entropy  
We investigate the strength and direction of information flow among economic policy uncertainty (EPU), US imports and exports to China, and the CNY/US exchange rate by using the novel concept of effective transfer entropy (ETE) with a sliding window methodology. We verify that this new method can capture dynamic orders effectively by validating them with the linear transfer entropy (TE) and Granger causality methods. Analysis shows that since 2016, US economic policy has contributed
more » ... y to China-US bilateral trade and that China is making passive adjustments based on this trade volume. Unlike trade market conditions, China's economic policy has significantly influenced the exchange rate fluctuation since 2016, which has, in turn, affected US economic policy.
doi:10.3390/e22060683 pmid:33286453 pmcid:PMC7517218 fatcat:6usilbp57jgu5ns4ndwv5qdovy