Economic Policy Uncertainty in Turkey
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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. 2018/272
Subject:
Credit default swap Employment GDP forecasting Labor Money National accounts
English
Publication Date:
December 10, 2018
ISBN/ISSN:
9781484387740/1018-5941
Stock No:
WPIEA2018272
Pages:
36
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