Does policy uncertainty increase economic and financial uncertainty in China?

Based on the 268-dimensional monthly data of China from 2002 to 2019, this paper measures China's policy uncertainty, economic uncertainty and financial uncertainty respectively, and further studies their correlation mechanism and influence dynamics by using dynamic spillover index and STVAR model. The results show that policy uncertainty will not only aggravate economic uncertainty and financial uncertainty, but also be positively affected by economic uncertainty and financial uncertainty. The spillover effect among policy uncertainty, economic uncertainty and financial uncertainty is affected by the degree of uncertainty, the level of economic development and the intensity of financial friction, which shows a significant nonlinear characteristic. For example, the aggravating effect of policy uncertainty on economic uncertainty and financial uncertainty obviously increases with the increase of uncertainty level and financial friction intensity, but it can be effectively alleviated in the period of economic prosperity. These findings provide useful empirical evidence and policy insights for a deeper understanding of the theoretical implications of macro uncertainty, a reasonable control of uncertainty levels in the economy, and a practical improvement of China's macro-control and financial regulatory policy framework. © 2022, Editorial Board of Journal of Systems Engineering Society of China. All right reserved.