Global economic policy uncertainty and its effects on selected emerging market countries

Economic policy uncertainty is a widespread debate area in the modern management, economics and finance. In the management perspective, understanding of organizational environment is one of the key contributor to good governance. In addition to this, macroeconomist focus on some kind of uncertainties such as inflation uncertainty, exchange rate uncertainty and growth rate uncertainty on the way of sustainable growth. As for financial side, the finance – growth nexus cannot separable from uncertainties around the environment. In recent years especially aftermath of global financial crisis, there has been a common search for novel measurement tool of economic policy uncertainty. Meanwhile, Global Economic Policy Uncertainty Index which is constructed by Baker, Bloom and Davis (2013) became a popular tool in order the grasp the impact of uncertainty both financial and real side of economy. Their method base upon text analysis via word searching from major newspapers of a selected country. The most prominent feature of the index is that its appearance in the media and academic papers. In addition to this, The Global Economic Policy Uncertainty Index provides high frequent and publicly available long span data. Therefore, there are other types of indices which use as a base of it. Although, there are ample of works concentrate on the influence on economic policy uncertainty in the literature, we focus on emerging market side of these effects. With this regard, we use a Panel VAR model with a sample of twelve countries and their financial variables. According to the model results, economic policy uncertainty impacts stock markets negatively, flattens the yield curve and depreciates the nominal currency.