Internal and external uncertainties and macroeconomic downside risk in China

Focusing on the macroeconomic downside risk under uncertainty shocks, we begin by refining the measurement of China's internal and external economic uncertainties, and the adjustment for extreme outliers caused by the COVID-19 pandemic is effective in enhancing the accuracy of uncertainty measurements. We then employ a quantile vector autoregression model to investigate the relationship between internal and external economic uncertainties and China's macroeconomic downside risk. The results indicate that when the economy is experiencing slow growth, the negative effects of internal uncertainty shocks become more pronounced. A high-intensity internal uncertainty shock may significantly increase the downside risk of China's economic growth. External uncertainty shocks can not only exert a direct impact on the downside risk of China's economy but also induce indirect disturbances by amplifying the internal uncertainty.