IMF Working Papers

Economic Policy Uncertainty in Turkey

By La-Bhus Fah Jirasavetakul, Antonio Spilimbergo

December 10, 2018

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La-Bhus Fah Jirasavetakul, and Antonio Spilimbergo. Economic Policy Uncertainty in Turkey, (USA: International Monetary Fund, 2018) accessed September 19, 2024

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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.

Subject: Credit default swap, Employment, GDP forecasting, Labor, Money, National accounts

Keywords: Credit default swap, Depreciation rate, Diff-in-diff estimation, Economic uncertainty, Employment, Employment growth, EPU index, Firm-level, GDP forecasting, Global, Gross investment, Investment decisions, Investment irreversibility, Investment model, Leverage strategies, Micro data, Policy uncertainty, Sector-level, Turkey, WP

Publication Details

  • Pages:

    36

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2018/272

  • Stock No:

    WPIEA2018272

  • ISBN:

    9781484387740

  • ISSN:

    1018-5941