Analysing the impact of Brexit on global uncertainty using functional linear regression with point of impact: the role of currency and equity markets
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Date
Authors
Mangisa, Siphumlile
Das, Sonali
Gupta, Rangan
Journal Title
Journal ISSN
Volume Title
Publisher
World Scientific Publishing
Abstract
This paper studies the relationship between monthly economic uncertainty of 20 advanced and emerging markets, and two daily covariates, i.e., exchange rate and stock index, with particular emphasis on the relationship between the variables in response to the Brexit vote. We use a functional data approach supplemented with a point of impact structure to conduct a mixed-frequency analysis. We find that incorporating the point of impact, in this case the Brexit shock, is marginally important relative to models that ignore it. We also find that the exchange rate played a more important role than the equity market in transmitting the Brexit shock to cause heightened uncertainty in the 20 countries considered. Our results have important policy implications.
Description
Keywords
Functional data analysis, Point of impact, Brexit, Uncertainty, Currency and stock markets, SDG-08: Decent work and economic growth
Sustainable Development Goals
Citation
Mangisa, S., Das, S. & Gupta, R. 2022, 'Analysing the impact of Brexit on global uncertainty using functional linear regression with point of impact: the role of currency and equity markets', The Singapore Economic Review, vol. 67, no. 04, pp. 1377-1388, doi : 10.1142/S0217590820460029.