scholarly journals Measuring Economic Policy Uncertainty*

2016 ◽  
Vol 131 (4) ◽  
pp. 1593-1636 ◽  
Author(s):  
Scott R. Baker ◽  
Nicholas Bloom ◽  
Steven J. Davis
Keyword(s):  
Economic Policy ◽  
Stock Price ◽  
Price Volatility ◽  
The United States ◽  
Policy Uncertainty ◽  
Firm Level ◽  
Vector Autoregressive ◽  
Economic Policy Uncertainty ◽  
Level Data ◽  
The 1960S

Abstract We develop a new index of economic policy uncertainty (EPU) based on newspaper coverage frequency. Several types of evidence—including human readings of 12,000 newspaper articles—indicate that our index proxies for movements in policy-related economic uncertainty. Our U.S. index spikes near tight presidential elections, Gulf Wars I and II, the 9/11 attacks, the failure of Lehman Brothers, the 2011 debt ceiling dispute, and other major battles over fiscal policy. Using firm-level data, we find that policy uncertainty is associated with greater stock price volatility and reduced investment and employment in policy-sensitive sectors like defense, health care, finance, and infrastructure construction. At the macro level, innovations in policy uncertainty foreshadow declines in investment, output, and employment in the United States and, in a panel vector autoregressive setting, for 12 major economies. Extending our U.S. index back to 1900, EPU rose dramatically in the 1930s (from late 1931) and has drifted upward since the 1960s.

scholarly journals Economic Policy Uncertainty and Corporate Mergers and Acquisitions

2020 ◽  
Vol 3 (4) ◽  
Author(s):  
Xun Han ◽  
Kexin Chen ◽  
Xianjing Huang
Keyword(s):  
Corporate Governance ◽  
Economic Policy ◽  
Mergers And Acquisitions ◽  
Stock Price ◽  
Price Volatility ◽  
Financing Constraints ◽  
Policy Uncertainty ◽  
Economic Policies ◽  
Economic Policy Uncertainty ◽  
The Relationship

In recent years, the frequent adjustment of the government’s economic policies and the uncertainty of foreign economic situations have made the degree of uncertainty of China’s economic policies rise continuously. The increasing degree of policy uncertainty will inevitably affect the investment and financing decisions of micro enterprises. Then, how does economic policy uncertainty (EPU) affect mergers and acquisitions (M&A) behavior? What’s the mechanism? Based on the above questions, this paper uses the data of non-financial listed companies in the Shanghai and Shenzhen stock exchanges from 2008 to 2018 as a sample to explore the relationship between EPU and M&A. The study shows that rising EPU will promote corporate M&A behavior, and this effect is more significant in slow-growth companies. The relationship between EPU and M&A is affected by corporate governance, stock price volatility and financing constraints. Specifically, the company’s M&A size is more sensitive to EPU with higher level of corporate governance, higher level of stock price volatility, and lesser financing constraints. Further research shows that the rise of EPU will significantly promote the improvement of M&A performance in the short-term, but this effect does not exist in the long-term. Various robustness checks do not change the empirical results of this paper. 

Connectedness Among Economic Policy Uncertainties: Evidence from the Time and Frequency Domain Perspectives

2020 ◽  
Vol 8 (5) ◽  
pp. 401-433
Author(s):  
Jinxin Cui ◽  
Huiwen Zou
Keyword(s):  
Economic Policy ◽  
Financial Crisis ◽  
Spillover Effects ◽  
The United States ◽  
Practical Significance ◽  
Policy Uncertainty ◽  
The Novel ◽  
Short Term ◽  
Economic Policy Uncertainty ◽  
Crisis Period

AbstractThis paper investigates the frequency connectedness among economic policy uncertainties of G20 countries using the novel frequency connectedness proposed by Barunik and Krehlik (2018) which can depict the dynamic connectedness not only over time but also across different frequencies. The empirical results obtained in this paper demonstrate that, firstly, the connectedness among economic policy uncertainties is significant, and the spillover effects during the financial crisis and the post-financial crisis period are stronger than the pre-financial crisis period. Secondly, the United States, France, and Australia are the main net-transmitters of the economic policy uncertainty spillovers while Brazil, Italy, Mexico, and Russia act as the main net-recipients of the spillovers. Thirdly, the major international events may significantly enhance the spillover transmissions of economic policy uncertainty among different countries, thus increasing the magnitude of the total connectedness. Finally, the economic policy uncertainty spillovers are mainly transmitted in the short term, i.e., 1∼4 months instead of longer time horizons in terms of the magnitude of the frequency connectedness measures. The findings of this paper not only have profound theoretical and practical significance but also provide several significant implications for the policymakers, supervision agents, international traders, and various investors.

scholarly journals Does Economic Policy Uncertainty Affect CO2 Emissions? Empirical Evidence from the United States

2020 ◽  
Vol 12 (21) ◽  
pp. 9108 ◽  
Author(s):  
Qing Wang ◽  
Kefeng Xiao ◽  
Zhou Lu
Keyword(s):  
United States ◽  
Economic Policy ◽  
Co2 Emissions ◽  
Structural Breaks ◽  
Unit Root Test ◽  
The United States ◽  
Policy Uncertainty ◽  
Energy Prices ◽  
Economic Policy Uncertainty ◽  
Long Run

This paper aims to examine the effects of economic policy uncertainty (measured by the World Uncertainty Index—WUI) on the level of CO2 emissions in the United States for the period from 1960 to 2016. For this purpose, we consider the unit root test with structural breaks and the autoregressive-distributed lag (ARDL) model. We find that the per capita income promotes CO2 emissions in the long run. Similarly, the WUI measures are positively associated with CO2 emissions in the long run. Energy prices negatively affect CO2 emissions both in the short run and the long run. Possible implications of climate change are also discussed.

THE ROLES OF ECONOMIC POLICY UNCERTAINTY AND THE COVID-19 PANDEMIC IN THE CORRELATION BETWEEN CRYPTOCURRENCY AND STOCK MARKETS

2020 ◽  
pp. 1-30
Author(s):  
LINGLING QIAN ◽  
YUEXIANG JIANG ◽  
HUAIGANG LONG ◽  
RUOYI SONG
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
The United States ◽  
Mixed Data ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
Market Portfolio ◽  
Hedging Strategies ◽  
The World ◽  
The Impact

We are the first to explore the effect of economic policy uncertainty (EPU) and the COVID-19 pandemic on the correlation between the cryptocurrency index CRIX and the world stock market portfolio, as well as the hedging properties of CRIX. To this end, we mainly apply the dynamic conditional correlation model with mixed data sampling regressions, a threshold vector autoregressive model and the generalized impulse response function. We demonstrate that the correlation is influenced by the uncertainty stance of the economy and behaves differently in low-, medium- and high-uncertainty periods. Most of the abnormal market relations exist in high levels of EPU or during the COVID-19 period, and the impact of global EPU is greater than that of EPU originating in the United States, Europe, Russia and China. Moreover, the CRIX can serve as a hedge asset against the world stock market. The high (low) level of EPU has a significantly positive (negative) effect on the optimal hedge ratio of CRIX, which increases significantly during the COVID-19 period. Our findings have implications for risk management, portfolio allocations and hedging strategies.

scholarly journals Impact of Economic Policy Uncertainty on Trade Credit Provision: The Role of Social Trust

2020 ◽  
Vol 12 (4) ◽  
pp. 1601 ◽  
Author(s):  
Peng Liu ◽  
Daxin Dong
Keyword(s):  
Economic Policy ◽  
Fixed Effects ◽  
Trade Credit ◽  
Social Trust ◽  
Alternative Measure ◽  
Policy Uncertainty ◽  
Firm Level ◽  
Economic Policy Uncertainty ◽  
The Impact

This paper explores the impact of economic policy uncertainty (EPU) on trade credit while taking into account the interactive role of social trust. The analysis is based on the panel data econometric model with fixed effects. Using firm-level data across 16 economies from 1995Q1 to 2015Q1, we find that (i) there exists a negative and highly significant relationship between economic policy uncertainty and the provision of trade credit; (ii) this relation is weaker for firms in countries with higher levels of social trust; and (iii) the effects of EPU and social trust are both more substantial for firms in more financially constrained industries. The impact of social trust is not a result of people’s high confidence in government, an effective legal system of enforcing contracts, a high-quality institutional system or an excellent system of protecting shareholders. Our result is robust if we exclude business cycle effects or use an alternative measure of financial constraints.

scholarly journals The Economic Policy Uncertainty in China, the United States, and Europe: The Empirical Impact on Chinese Stock Markets

2019 ◽  
Vol 6 (5) ◽  
pp. 131
Author(s):  
Wannakomol Supachart
Keyword(s):  
United States ◽  
Economic Policy ◽  
Stock Markets ◽  
The United States ◽  
Policy Uncertainty ◽  
Cross Sectional ◽  
Economic Policy Uncertainty ◽  
Chinese Markets ◽  
Chinese Stock Markets ◽  
The Impact

The objective of this paper is to analyze the impact of economic policy uncertainty (EPU) in China, the United States, and Europe, which are influent to the Chinese stock markets. We employed Vector Autoregression (VAR) model with relative variables including the EPU indices and three Chinese stock markers indices to display the impulse responses of the markets to the EPUs. Our results indicate that the Chinese stock markets negatively respond to their domestic economic policy uncertainty in the first, second, and third month after the EPU shocks. Moreover, we also found the negative responses of the Chinese markets to the EPU from the United States that require five months to rebalance the markets. However, the Chinese markets seem positively respond to the shocks of the economic policy uncertainty in Europe and also took five months to archive market rebalancing. The significant correlation of the economic policy uncertainty between China and the United States resulted in cross-sectional correlation estimates among the EPU indices. Furthermore, there is the reasonable interesting result to claim that the economic policy uncertainty in China is statistically influenced by their own trade and fiscal policy uncertainty that may be considered to be related with China-US trade war in our conclusion.

scholarly journals Forecasting the volatility of EUA futures with economic policy uncertainty using the GARCH-MIDAS model

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Jian Liu ◽  
Ziting Zhang ◽  
Lizhao Yan ◽  
Fenghua Wen
Keyword(s):  
European Union ◽  
Economic Policy ◽  
Predictive Power ◽  
Price Volatility ◽  
Policy Uncertainty ◽  
Futures Prices ◽  
Noticeable Effect ◽  
Economic Policy Uncertainty ◽  
The Impact ◽  
The Eu

AbstractThis study investigates the impact of economic policy uncertainty (EPU) on the volatility of European Union (EU) carbon futures prices and whether it has predictive power for the volatility of carbon futures prices. The GARCH-MIDAS model is applied for evaluating the impact of different EPU indexes on the price volatility of European Union Allowance (EUA) futures. We then compare the predictive power for the volatility of the two GARCH-MIDAS models based on different EPU indexes and six GARCH-type models. Our empirical results show that the GARCH-MIDAS models, which exhibit superior out-of-sample predictive ability, outperform GARCH-type models. The results also indicate that EPU has noticeable effect on the volatility of EUA futures. Specifically, the forecast accuracy of the EU EPU index is significantly higher than that of the global EPU index. Robustness checks further confirm that the EPU index (especially the EPU index of the EU) has strong predictive power for EUA futures prices. Additionally, using the volatility forecasting methods that GARCH-MIDAS models combine with the EPU index, investors can construct their portfolios to realize economic returns.

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