The effect of EPU spillovers on the bond returns: a cross-country analysis

Recognizing the interconnectedness between domestic and foreign economic policy uncertainty (EPU), this article employs a novel method - the multivariate quantile model (White, Kim, and Manganelli 2015) - to develop a clean measure of EPU spillovers. Using a sample of 23 countries between 2006 and 2019, we document solid evidence that countries with higher EPU spillovers observe significantly lower future excess bond returns. This effect becomes stronger during crisis periods and among emerging markets.