Nexus between economic stability and political stability in China and Japan

Abstract

This research aims to investigate the causal relationship between economic stability and political stability for Japanese and Chinese markets. Based on the study’s aims, time domain causality tests-Granger causality, Toda-Yamamoto causality, and nonlinear Diks-Panchenko causality-and a frequency domain causality test-spectral Breitung and Candelon causality-are employed. The outcomes of the time domain causality tests reveal that there is feedback causality between political stability and economic stability in both countries, indicating that political stability is an important predictor for economic stability in both countries and vice versa. © 2021, Weissberg SRL. All rights reserved.