Date of Award

Fall 2020

Project Type


Program or Major


Degree Name

Doctor of Philosophy

First Advisor

Jaroslav Horvath

Second Advisor

Yin Germaschewski

Third Advisor

Michael Goldberg


This dissertation is a collection of three essays about uncertainty and conducts a country-specific study based on China.

In Chapter 1, I investigate the impact of US uncertainty shocks on China's macroeconomy with a focus on the dynamic response of investment. Using a structural vector autoregression model, I find that the wait-and-see mechanism of aggregate investment in the face of heightened US uncertainty disappears in China. Robust evidence confirms that the increase in state-owned enterprises' investment in response to heightened uncertainty explains this puzzle, while private-owned enterprises' investment decreases as expected. I apply regime-dependent local projections to link uncertainty shocks with credit regimes to explore whether the impact of US uncertainty shocks on investment in China has varied over time in connection with the states of bank loans. The empirical results support a positive response of state-owned enterprises' investment to increased US uncertainty during the tightening of medium- and long-term bank loans but a negative reaction when short-term bank loans are tightening. Finally, I show that economic policy uncertainty conveying political signals leads to a decline in state-owned enterprises' investment. Overall, this paper provides richer empirical evidence on the investment-uncertainty nexus.

In Chapter 2, I examine the time-varying responses of monetary policy to uncertainty shocks in China. Based on China's monetary policy regimes identified by the narrative approach to identify China's monetary policy regimes, the rolling sample VAR confirms the time-varying patterns of distinct monetary policy instruments in coping with uncertainty shocks. The time-varying parameters VAR further shows that heightened uncertainty leads to a persistent decline in the policy rate and money supply, suggesting that the interest rate is a more effective monetary policy instrument in response to uncertainty shocks. I finally investigate the state-dependent impulse responses to monetary policy shocks under low and high levels of uncertainty and find that money supply instrument is less effective during the high uncertainty periods while the efficacy of interest rate instrument won't be weakened by the increasing uncertainty. Overall, the empirical findings support the on-going transformation of China's monetary policy from the quantity-based to the price-based policy rule.

In Chapter 3, I explore the cross-country economic policy uncertainty (EPU) spillovers in time and frequency domains, with a focus on how China's EPU influences EPU in other countries. The time-domain analysis shows that China is a net receiver of global EPU but has stronger outward spillovers during the global financial crisis. The connectedness network demonstrates that China only plays a minor role in the transmission network of global EPU. The frequency-domain results further uncover that international spillovers of China's EPU are mainly driven by short-term spillovers. However, during the global financial crisis, the medium-term and long-term spillovers temporarily dominate compared to the short-term spillovers. Overall, the empirical results have important policy implications because economic policy uncertainty arising abroad might have domestic consequences through international spillovers channel.