Economic policy uncertainty and stock liquidity: the role of board networks in an emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
William Mbanyele
Keyword(s):  
Economic Policy ◽  
Adverse Effects ◽  
Emerging Market ◽  
Estimation Method ◽  
Policy Uncertainty ◽  
Stock Liquidity ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Board Networks

PurposeThe purpose of this study is to examine the role of board networks in promoting stock liquidity when there is high economic policy uncertainty using a sample of Brazilian firms from 2002 to 2015.Design/methodology/approachThe study employs the ordinary least squares estimation method with standard errors clustered at the firm level for preliminary analysis, besides the study employs the two-step GMM dynamic estimation method to deal with potential endogeneity issues.FindingsFirst, the findings show that economic policy uncertainty disproportionately contributes to stock illiquidity and the impact is mainly prominent for high risky companies, small firms and firms in competitive industries. Second, the author provides evidence that board networks promote stock liquidity more via the information channel when economic policy uncertainty is very high.Practical implicationsGiven the adverse effects of economic policy uncertainty on stock liquidity, governments need to swiftly communicate and implement policies that affect the capital market to avoid the drying up of liquidity, which is exacerbated by communication or implementation lags. Also, there is a need for the regulators to continuously encourage the inclusion of independent directors in boards, which helps to increase board monitoring capacity and the firms' ability to respond to changes in the external environment.Originality/valueUnlike other studies that focus on the adverse effects of economic policy uncertainty on firm outcomes, the novel contribution is that the author uncovers the role of board networks in mitigating the negative effects of economic policy uncertainty on stock liquidity.

Geopolitical risk, economic growth, economic uncertainty and international inbound tourism: an Indian Illustration

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sudeshna Ghosh
Keyword(s):  
Economic Growth ◽  
Economic Policy ◽  
Trade Openness ◽  
Policy Uncertainty ◽  
Tourism Demand ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Long Run ◽  
Geopolitical Risks

Purpose This paper aims to consider the role of geopolitical risk in explaining tourism demand in India, a major tourist destination of the Asian region. Furthermore, the study also considers how in addition to geopolitical risk, economic policy uncertainty, economic growth, exchange rate, inflation and trade openness impact tourism demand. Design/methodology/approach The Bayer and Hanck (2013) method of cointegration is applied to explore the relationship between geopolitical risk and tourism demand. Furthermore, the study has also used the auto distributed lag model to determine whether there is a long-run cointegrating association between tourism demand, geopolitical risk, economic policy uncertainty, economic growth, exchange rate and trade openness. Finally, the vector error correction model confirms the direction of causality across the set of the major variables. Findings This paper finds that geopolitical risk adversely impacts inbound international travel to India. This study also obtains the consistency of the results across different estimation techniques controlling for important macro variables. The Granger causality test confirms the unidirectional causality from geopolitical risk to tourism and further from economic uncertainty to tourism. The findings from the study confirm that geopolitical risks have long-term repercussions on the tourism sector in India. The results indicate that there is an urgent need to develop a pre-crisis management plan to protect the aura of Indian tourism. The tourism business houses should develop skilful marketing strategies in the post-crisis to boost the confidence of the tourists. Research limitations/implications This paper provides valuable practical implications to tourism business houses. The tourism business houses can explore geopolitical risk measure and economic policy uncertainty measure to analyse the demand for international tourism in India. Further, the major stakeholders can establish platforms to help tourists to overcome the fear associated with geopolitical risk. Originality/value This study is the first of its kind to explore the geopolitical risks and their long-run consequences in the context of tourism in India. The study puts emphasis on the role of national policy to maintain peace otherwise it would be detrimental to tourism.

Economic policy uncertainty and stock market liquidity

2018 ◽  
Vol 10 (1) ◽  
pp. 112-135 ◽  
Author(s):  
Byomakesh Debata ◽  
Jitendra Mahakud
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Financial Crises ◽  
Emerging Market ◽  
Decomposition Analysis ◽  
Market Liquidity ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Stock Market Liquidity

Purpose This study aims to examine the relationship between economic policy uncertainty and stock market liquidity in an order-driven emerging stock market. Design/methodology/approach Empirical estimates are based on vector autoregressive Granger-causality tests, impulse response functions and variance decomposition analysis. Findings The empirical findings suggest that economic policy uncertainty moderately influences stock market liquidity during normal market conditions. However, the role of economic policy uncertainty for determining stock market liquidity is significant in times of financial crises. The authors have also observed a significant portion of variation in stock market liquidity that is attributed to investor sentiments during financial crises. Originality/value This study is original in nature and provides evidence to consider economic policy uncertainty as a possible source of commonality in liquidity in the context of an emerging market.

Analysis of global economic policy uncertainty and export flows for emerging markets with panel VAR modeling

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Çağlayan Aslan ◽  
Senay Acikgoz
Keyword(s):  
Economic Policy ◽  
Emerging Markets ◽  
Emerging Market ◽  
Partial Least Square ◽  
Panel Var ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Real ◽  
Export Flows

PurposeThe purpose of this paper to examine how global economic policy uncertainty (GEPU) affects export flows of emerging market economies.Design/methodology/approachThis study examines the effect of GEPU on 28 emerging markets' export performance. GEPU variable used in the authors’ empirical analysis is measured by partial least square (PLS) factor loading model with the help of 24 countries' economic policy uncertainty index. A panel vector autoregression (VAR) model is employed for the estimations and monthly data over the 2006:01–2019:12 period are used.FindingsThe empirical findings show that while the real external income is the main factor that affects export flows, the real exchange rate is the least effective variable with regard to the variance decomposition, which is not expected by the related economic theory. Panel VAR estimations results confirm the previous studies and find that GEPU affects export flows negatively and significantly.Originality/valueTo the best of the authors’ knowledge, this is the sole study in terms of focusing on the impacts of GEPU on the export volume of emerging markets. The contribution of this paper is twofold. Firstly, a large set of countries with monthly frequented data that assist to capture uncertainties better is used. Secondly, the global economic policy index is obtained by employing the PLS method, which provides more robust results that are calculated with respect to the dependent variable.

The role of economic policy uncertainty in the US entrepreneurship-unemployment nexus

2015 ◽  
Vol 4 (3) ◽  
pp. 352-366 ◽  
Author(s):  
James E Payne
Keyword(s):  
Economic Policy ◽  
The Self ◽  
Data Availability ◽  
Var Model ◽  
Response Analysis ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Self Employment

Purpose – The purpose of this paper is to extend the literature on the entrepreneurship-unemployment nexus to include the role of economic policy uncertainty in the causal dynamics. Design/methodology/approach – The study utilizes the Toda-Yamamoto causality tests of a vector autoregressive (VAR) model to infer the causal dynamics between the self-employment rate (SER), the unemployment rate (UR), industrial production (IP), and the economic policy uncertainty index (EPUI) in the case of the USA. In addition to the examination of the causal dynamics, generalize impulse response analysis is undertaken to examine the role of unexpected shocks to the current and future behavior of the variables specified in the VAR model. Findings – The results reveal unidirectional causality from the SER, IP, and the EPUI to the UR. An increase in the SER and IP lowers the UR while an increase in the EPUI raises the UR. The findings also show unidirectional causality from the EPUI to IP in which an increase in the EPUI reduces IP. Research limitations/implications – Due to data availability for higher frequency monthly data, the self-employment data limits the analysis to 2000:1 to 2014:11. Practical implications – The results reiterate the importance of minimizing economic policy uncertainty as a means to facilitate effective planning by entrepreneurs and economic agents. Moreover, policies designed to encourage entrepreneurship (self-employment) aids in the reduction of unemployment. Social implications – Policies designed to encourage entrepreneurship also facilitate the reduction in the UR. Also, greater policy transparency and stability has a positive impact on entrepreneurial activities. Originality/value – This is the first study to incorporate the role of economic policy uncertainty in the examination of the causal dynamics between entrepreneurship and unemployment.

Economic policy uncertainty and stock liquidity: evidence from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Liguang Zhang ◽  
Wanyi Chen ◽  
Ning Hu
Keyword(s):  
Economic Policy ◽  
Investor Sentiment ◽  
Least Square ◽  
Transmission Mechanism ◽  
Policy Uncertainty ◽  
Data Set ◽  
Stock Liquidity ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Impact

PurposeThe main purpose of this study is to examine whether economic policy uncertainty affects the stock liquidity. Furthermore, this study explores the influencing factors, transmission mechanism and solution path between economic policy uncertainty and the stock liquidity.Design/methodology/approachA data set comprising 97,729 firm-quarter observations of Chinese firms with A-shares listed on the Shenzhen and Shanghai stock exchanges was selected, China's economic policy uncertainty was measured by using the China Economic Policy Uncertainty Index and the impact of economic policy uncertainty on the stock liquidity over the period 2004–2017 was empirically tested. The empirical analysis was based on ordinary least square regression model, and mediation and moderation effect models were used in the further analysis.FindingsThe empirical results show that the higher the economic policy uncertainty, the lower the stock liquidity, which is more significant in firms with an opaque information environment, less investor attention and weak risk resistance ability. The authors argue that the transmission mechanism can be explained by the quality of information disclosure and investor sentiment. Moreover, the negative impact of economic policy uncertainty on the stock liquidity can be mitigated by increasing voluntary disclosures.Originality/valueThis study enriches the literature on factors affecting the stock liquidity from the perspective of macroeconomic policy and provides a reference for policymakers to formulate relevant measures to improve the stock liquidity in emerging markets.

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