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Political uncertainty and macro-financial dynamics in the BRICS

Author

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  • Jawadi, Fredj
  • Pondie, Thierry M.

Abstract

We empirically study the impact of political uncertainty on macro-financial variables (stock prices, inflation, consumption) and behavioral dynamics (consumer confidence, anxiety) in the BRICS over the period 1990–2022. To this end, we applied a panel vector autoregressive (PVAR) model that tests further endogenous interactions between the variables in the model. Accordingly, we find that political uncertainty increases inflation while reducing consumer spending and stock prices. In addition, we find that consumer confidence and investor anxiety are negatively affected by political uncertainty. Our results have different implications, especially for policymakers who have to tackle political uncertainty in order to protect householders and investors more effectively.

Suggested Citation

  • Jawadi, Fredj & Pondie, Thierry M., 2024. "Political uncertainty and macro-financial dynamics in the BRICS," International Economics, Elsevier, vol. 179(C).
    • Handle: RePEc:eee:inteco:v:179:y:2024:i:c:s2110701724000465
    DOI: 10.1016/j.inteco.2024.100523
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    More about this item

    Keywords

    Political uncertainty; Consumer spending; Inflation; Stock prices; Consumer confidence; PVAR;
    All these keywords.

    JEL classification:

    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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