Abstract: At present, the international economic and financial landscape is undergoing profound adjustment, the external economic environment is becoming more complex, and the domestic economic environment is becoming more dependent on economic policies. The situation of internal and external problems has led to a gradual increase in the frequency and intensity of economic policies formulated and implemented by countries. Increased economic policy uncertainty can exacerbate macroeconomic operational risks, such as domestic consumption and investment, which can lead to exchange rate volatility. In addition, increased economic policy uncertainty prevents international investors from accurately assessing the risks arising from the policy adjustment process, which has a significant impact on international capital flows. In turn, changes in exchange rates and international capital flows can have far-reaching effects on economic policy uncertainty. The objective of this paper is to examine the dynamic evolution of the relationship among short-term international capital flows, exchange rates, and economic policy uncertainty using a variety of analytical approaches.
This paper makes important contributions to both the academic and practitioner communities. First, this paper provides a research framework for the VAR family model. Specifically, in order to avoid unwarranted model setting, this paper first conducts a nonlinearity test based on the BDS and RESET methods. The results show a significant nonlinear relationship among the exchange rate, international capital flows and China's economic policy uncertainty. Furthermore, this paper compares three types of vector autoregressive (VAR) models with linear and nonlinear structures based on Bayesian model comparison criteria. This paper improves the lack of basis in the selection of econometric models in the relevant empirical literature, and also validates the nonlinearity test results. Second, this paper captures the time-varying characteristics, stochastic volatility and spillover effects among short-term international capital flows, exchange rate and Chinese economic policy uncertainty through various dynamic analysis methods, including stochastic volatility analysis and three-dimensional time-varying impulse response analysis. This paper rationalizes the dynamic interactions and shock effects among short-term international capital flows, exchange rates and Chinese economic policy uncertainty, which helps regulators to formulate and adjust various policies and effectively promote a series of measures such as financial reforms.
Our empirical results are as follows. The TVP-SV-VAR model has the largest log marginal likelihood, suggesting that the evolutionary history between economic policy uncertainty, exchange rates, and international capital flows cannot ignore time-varying features and the effects of stochastic volatility.There is a significant immediate transmission effect of exchange rate change shocks on international capital flows, but the transmission of international capital flows to the exchange rate is relatively weak. RMB depreciation significantly increases China's economic policy uncertainty, while increased economic policy uncertainty in turn causes RMB appreciation in the short run. In addition, the impact of increased Chinese economic policy uncertainty on international capital inflows is more pronounced, and after 2012, the shock effect of Chinese economic policy uncertainty on both the exchange rate and international capital flows is significantly stronger.
Since this paper only considers the case of China, there is still room for further exploration of the relationship between short-term international capital flows, exchange rates, and economic policy uncertainty. In the future, we can consider expanding the sample size to different countries for further research. This paper is supported by the National Natural Science Foundation of China(71963008; 71601048)and Guangxi Natural Science Foundation Joint Incubation Program(2018GXNSFAA294131). We would like to express our deep gratitude to them.

Key words: economic policy uncertainty, short-term international capital flows, exchange rate reform, Bayesian model comparison, time-varying parameter vector autoregression

摘要： 在全球不确定性日益加剧背景下,本文阐释了经济政策不确定性、汇率与国际资本流动之间的互动机制,并进行实证研究。根据初步检验结果,构建多类包括非线性结构和异方差性质的VAR模型,并通过贝叶斯模型比较准则选取TVP-SV-VAR模型进行分析。实证结果表明:汇率变动冲击对国际资本流动存在显著的即时传导影响,但国际资本流动对汇率的传导则相对较弱。人民币贬值会显著增加我国经济政策不确定性,而经济政策不确定性增加会反过来在短期内引起人民币有升值之势。此外,经济政策不确定性增加对国际资本流入的影响较突出。2012年后,经济政策不确定性对汇率和国际资本流动的冲击效果均明显强化。

关键词: 经济政策不确定性, 短期国际资本流动, 汇改, 贝叶斯模型比较, 时变参数向量自回归