Economic Policy Uncertainty in Turkey

Author/Editor:

La-Bhus Fah Jirasavetakul ; Antonio Spilimbergo

Publication Date:

December 10, 2018

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Uncertainty over economic policy plays a key role in economic outcomes. But evidence and quantification for emerging markets are elusive because of measurement and reverse causality issues. In this paper, we construct a news-based economic policy uncertainty (EPU) index for Turkey and assess how it affects Turkish firms. To disentangle the issues of endogeneity and reverse causality, we use a difference-in-differences approach, exploiting the fact that firms with a high share of irreversible investment are more exposed to policy uncertainty. In sectors with large irreversible investment EPU has a greater effect on growth, investment, and leverage. The results are robust to different definitions of investment irreversibility, lag structure, and selection of sectors.

Series:

Working Paper No. 18/272

English

Publication Date:

December 10, 2018

ISBN/ISSN:

9781484387740/1018-5941

Stock No:

WPIEA2018272

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

36

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