This paper analyses the directional spillover effects and connectedness for both return and volatility of nine US dol-lar exchange rates of globally most traded currencies under the influence of trade policy uncertainty. We find two interesting results over the study period ranging from December 1993 to July 2019. First, there exists asymmetric spillovers and connectedness among the considered exchange rates when trade policy uncertainty is present. Sec-ond, the volatility spillover is stronger than the return connectedness between exchange rate and trade policy uncer-tainty. These findings are robust to the presence of economic policy uncertainty effects. Concomitantly, the trade policy uncertainty patterns are also found to be useful for predicting currency market dynamics. Our findings con-tribute to the debate on the impact of trade policy uncertainty on the global economy and financial sector.
|Journal||Quarterly Review of Economics and Finance|
|Publication status||Accepted/In press - 19 Sep 2020|
Duc Huynh, T. L., Nasir, M. A., & Nguyen, D. K. (Accepted/In press). Spillovers and Connectedness in Foreign Exchange Markets: The Role of Trade Policy Uncertainty. Quarterly Review of Economics and Finance.