Journal
ENTROPY
Volume 22, Issue 6, Pages -Publisher
MDPI
DOI: 10.3390/e22060683
Keywords
EPU; transfer entropy; exchange rate
Categories
Funding
- National Social Science Foundation of China [19BJL086]
- Natural Science Foundation of Guangdong Province of China [2019A1515010471, 2017A030313396]
- MOE (Ministry of Education in China) Project of Humanities and Social Sciences [17YJAZH109]
- Soft science research program of Guangdong Province [2020A1010020005]
- Fundamental Research Funds for the Central Universities [2019MS082, 2020ZDPY19]
- Guangzhou National Innovation-oriented City Development Research Center [2017IC02]
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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 substantially 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.
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