Asymmetrical Spillover Effects of Policy Uncertainty and Macroeconomic Shock Transmission Across Economies

Asymmetrical Spillover Effects of Policy Uncertainty and Macroeconomic Shock Transmission Across Economies | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Asymmetrical Spillover Effects of Policy Uncertainty and Macroeconomic Shock Transmission Across Economies Sovini Mondal, Adesh Acharya, Tarun Khandelwal This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6911120/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Amid rising global uncertainties and shifting economic alliances, understanding the dynamic transmission of macroeconomic shocks is essential for informed and resilient policy-making. This study explores the evolving macroeconomic connectedness among the largest four economies using a Time-Varying Parameter Vector Autoregression (TVP-VAR) framework. By analyzing key uncertainty indices such as Economic Policy Uncertainty (EPU), Trade Policy Uncertainty (TPU), and macroeconomic indicators such as GDP, FDI, and trade flows reveal time-varying, variable-specific patterns of shock diffusion across countries. Our findings reveal the scalability impact of asymmetric shock transmissions across them. The EPU shock is mainly transmitted by the U.S., and China is at the receiving end. Contradicting the TPU shock pattern between these two countries. This shows that the policy adoption by the U.S. is actively reshaping its trade dynamics to become a secure trade partner, while China's intricate link to its global trade drives this TPU shocks outflow. On the other side, India acts as a major export shock transmission, followed by Germany, while import shocks are transmitted by the U.S. and China. These asymmetrical spillover effects highlight the policy implications, like diversifying trade partnerships and engagement through regional and plurilateral agreements, with stable trade partnerships across countries. Focusing on sector-specific trade agreements can help build resilience amid uncertainty. Additionally, reducing reliance on high-risk partners, diversifying value chains, and strengthening critical sectors are key strategies to mitigate external shocks and build sustainable long-term economic stability. JEL Classification E02, F01, F13, F14, D80 Economic Policy Uncertainty (EPU) Trade Policy Uncertainty (TPU) TVP-VAR Economic Connectedness US-China tension Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6911120","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":479740757,"identity":"276e864c-3230-4de5-952e-a14482d3327f","order_by":0,"name":"Sovini Mondal","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAw0lEQVRIiWNgGAWjYLACHgYLOZK1SBiTriWxgWjV8tMOH3vwpkYifTv74YePKxhs8uUdCGgxuJ2WbjjnmETuzp40Y8MzDGmWGw8Q0iKdYybNwyaRu+EGg5lkA8NhA0NCTpSfDdLyTyLd4Ab7959EaWG4DdTC2yaRYHCDx4wRpEWekA6gX9Ik5/ZJGG44k1Ms2WCQZmBASIv87ORjEm++2cgbHD++8WNDhY2BPEGHoVkKRAdI0wKyl0RbRsEoGAWjYPgDAFfkOksCxqw6AAAAAElFTkSuQmCC","orcid":"","institution":"National Council of Applied Economic Research","correspondingAuthor":true,"prefix":"","firstName":"Sovini","middleName":"","lastName":"Mondal","suffix":""},{"id":479740759,"identity":"bd04ea9f-9702-4deb-a74c-7f841345a6bb","order_by":1,"name":"Adesh Acharya","email":"","orcid":"","institution":"State Street, India","correspondingAuthor":false,"prefix":"","firstName":"Adesh","middleName":"","lastName":"Acharya","suffix":""},{"id":479740761,"identity":"acada7d7-33aa-41f9-86bb-76754001d4f6","order_by":2,"name":"Tarun Khandelwal","email":"","orcid":"","institution":"Symbiosis International University","correspondingAuthor":false,"prefix":"","firstName":"Tarun","middleName":"","lastName":"Khandelwal","suffix":""}],"badges":[],"createdAt":"2025-06-17 06:53:28","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-6911120/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6911120/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":100737292,"identity":"c7065fd1-f81a-49a1-83c2-be2958ffba22","added_by":"auto","created_at":"2026-01-20 22:52:30","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":431503,"visible":true,"origin":"","legend":"","description":"","filename":"Manuscript18062025.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6911120/v1_covered_b2cf9d57-7254-4191-8cc2-5cd1fdc0c90d.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Asymmetrical Spillover Effects of Policy Uncertainty and Macroeconomic Shock Transmission Across Economies","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Economic Policy Uncertainty (EPU), Trade Policy Uncertainty (TPU), TVP-VAR, Economic Connectedness, US-China tension","lastPublishedDoi":"10.21203/rs.3.rs-6911120/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6911120/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eAmid rising global uncertainties and shifting economic alliances, understanding the dynamic transmission of macroeconomic shocks is essential for informed and resilient policy-making. 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