External asset network and international transmission of economic policy uncertainty

With the gradual deepening of economic globalization, the international external asset holdings has reached an astonishing scale, and its role in the international transmission of Economic Policy Uncertainty should be given sufficient attention. By using the Rolling-Lasso method to construct a cross-border transmission network of Economic Policy Uncertainty, this article explores how the transmission is affected by the external asset and its structure. The results show that: (1) There is a significant positive correlation between the scale of external asset and the cross-border transmission of Economic Policy Uncertainty. (2) The impact of external asset shows structural characteristics, i.e., the effect of Portfolio Investment and Direct Investment is relatively more significant than that of bond assets in equity assets. (3) For those countries with lower level of financial openness or pegging and anchoring exchange rate regimes, they are more likely to transmit Economic Policy Uncertainty to the destinations of external investment.