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Global uncertainty and Global Economic Policy Uncertainty: Different implications for firm investment

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  • Suh, Hyunduk
  • Yang, Jin Young

Abstract

Global Economic Policy Uncertainty (EPU) and non-EPU global uncertainty measures exhibit heterogeneous behavior, especially in 2010s. Using firm-level data from 36 countries, we estimate the effect of global uncertainty on corporate investment in 1997–2016. Eleven global uncertainty measures, including global EPU, are employed to encompass macro, micro, and higher-order dimensions of uncertainty. We find different effect of EPU and non-EPU global uncertainty measures on investment. Only EPU measures negatively affect investment, while non-EPU measures have positive effects, which suggests a possible first-order implication of EPU.

Suggested Citation

  • Suh, Hyunduk & Yang, Jin Young, 2021. "Global uncertainty and Global Economic Policy Uncertainty: Different implications for firm investment," Economics Letters, Elsevier, vol. 200(C).
    • Handle: RePEc:eee:ecolet:v:200:y:2021:i:c:s0165176521000446
    DOI: 10.1016/j.econlet.2021.109767
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    Cited by:

    1. Feng, Zhuozhao & Lin, Juan, 2023. "Macroeconomic uncertainty and firms’ investment in China," Economics Letters, Elsevier, vol. 226(C).
    2. Nekhili, Ramzi & Mensi, Walid & Vo, Xuan Vinh, 2021. "Multiscale spillovers and connectedness between gold, copper, oil, wheat and currency markets," Resources Policy, Elsevier, vol. 74(C).
    3. MORIKAWA Masayuki, 2022. "Firms' Knightian Uncertainty during the COVID-19 Crisis," Discussion papers 22089, Research Institute of Economy, Trade and Industry (RIETI).
    4. de la Horra, Luis P. & Perote, Javier & de la Fuente, Gabriel, 2022. "The impact of economic policy uncertainty and monetary policy on R&D investment: An option pricing approach," Economics Letters, Elsevier, vol. 214(C).
    5. Hossain Mohammad Reyad & Mohd Ashhari Zariyawati & Tze San Ong & Haslinah Muhamad, 2022. "The Impact of Macroeconomic Risk Factors, the Adoption of Financial Derivatives on Working Capital Management, and Firm Performance," Sustainability, MDPI, vol. 14(21), pages 1-19, November.
    6. Yuanting Xia & Wenxiu Hu & Zhenxing Su, 2022. "Economic Policy Uncertainty, Social Financing Scale and Local Fiscal Sustainability: Evidence from Local Governments in China," Sustainability, MDPI, vol. 14(12), pages 1-19, June.
    7. Hwang, So Jung & Suh, Hyunduk, 2021. "Overall and time-varying effects of global and domestic uncertainty on the Korean economy," Journal of Asian Economics, Elsevier, vol. 76(C).

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    More about this item

    Keywords

    Global uncertainty; Economic Policy Uncertainty; Investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F30 - International Economics - - International Finance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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