Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223807
Authors: 
Abid, Abir
Rault, Christophe
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13365
Abstract: 
We examine the Exchange Rate Volatility (ERV) response to the Economic Policy Uncertainty (EPU) shocks from a panel VAR perspective used for the first time in this context. Focusing on Emerging Market Economies (EME), our noteworthy findings postulate that (a) both home and foreign EPU shocks are highly significant in explaining the ERV, (b) the contribution of the foreign EPU to the ERV fluctuation overcomes the local EPU's share, (c) the ERV acts as a significant transmission channel of the US-EPU to the economic activity, (d) the home EPU increases with higher US-EPU and vice versa and (e) the latter is surprisingly and markedly sensitive to EME macroeconomic conditions. Our findings are robust to different sensitivity analyses, provide novel insights into EPU international spillovers, and have interesting policy implications for EME decisions makers and investors.
Subjects: 
emerging markets
economic policy uncertainty
exchange rates volatility
Panel VAR
JEL: 
G15
E44
C22
Document Type: 
Working Paper

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