Economic Policy Uncertainty in Turkey

By La-Bhus Fah Jirasavetakul, Antonio Spilimbergo

December 10, 2018

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Format: Chicago

La-Bhus Fah Jirasavetakul, and Antonio Spilimbergo. Economic Policy Uncertainty in Turkey, (USA: International Monetary Fund, 2018) accessed November 21, 2024

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.

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:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/272
Stock No:

WPIEA2018272
ISBN:

9781484387740
ISSN:

1018-5941

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