Foreign Economic Policy Uncertainty: Does it Matter to Thailand’s Financial Market?

The economic policy uncertainty does not always negatively impact the financial market. This is a very first empirical paper that intends to investigate the influence of economic policy uncertainty (EPU) from foreign regions that could make an effect on the financial market in Thailand. The Seemingly Unrelated Regression and Markov Switching approach are used in the study to analyze the power of the EPU from the world major economies, which are the United States, Europe, China and Japan, whether exist in Thailand’s financial market or not. The empirical results does not indicate only negative effects that the foreign EPU could affect the market but also positive influence, particularly the EPU from Europe and China in which are shown to be significantly correlated with the total return of Thailand’s stock market. Furthermore, the findings also reveal the influence of foreign EPUs that persistently exist in overall financial market suggested by high Markov switching filtered probabilities