Global economic policy uncertainty as a main driver of financial impacts and performances in the financial markets: Evidence from emerging market economies

Abstract

In the aftermath of global financial crisis, the early warning systems on state of economy become important. In order to understand the trend and structure of state of economy and sentiment of decision-makers, both academicians and professionals try to develop new tools. Economic policy uncertainty indices are popular examples of them. These indices are used in many academic papers and investor analysis in order to understand financial atmosphere. In this chapter, we review economic policy uncertainty indices from A to Z by focusing a specific original one and its financial impacts and performances on emerging market economies. As a result, by using panel VAR method, we find that economic policy uncertainty influences stock markets negatively, flattens the yield curve and depreciates the nominal currency.