Measuring global and country-specific uncertainty

Ozturk, Ezgi O.; Sheng, Xuguang Simon

doi:10.1016/j.jimonfin.2017.07.014

Cited by 112 publications

(52 citation statements)

References 19 publications

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“…As in Bloom (2009), uncertainty is given by the volatility of daily equity prices of the G-7. Ozturk and Sheng (2016) construct a monthly measure of global uncertainty as the PPP-weighted average of the country-specific uncertainties for a dataset of forecast data for 46 advanced and emerging market economies. Leduc and Liu (2015) examine the effects of uncertainty, measured by Michigan Survey results on the fraction of respondents reporting that "uncertain future" make it a bad time to buy cars or durable goods over the next 12 months, on the U.S. unemployment rate.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Global Uncertainty on the Global Economy, and Large Developed and Developing Economies

Kang¹,

Ratti

Vespignani

2017

SSRN Journal

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Global uncertainty shocks are associated with a sharp decline in global inflation, global growth and in the global interest rate. Over 1981 to 2014 global financial uncertainty forecasts 18.26% and 14.95% of the variation in global growth and global inflation respectively. Global uncertainty shocks have more protracted, statistically significant and substantial effects on global growth, inflation and interest rate than U.S. uncertainty shocks. U.S. uncertainty lags global uncertainty by one month. When controlling for domestic uncertainty, the decline in output following a rise in global uncertainty is statistically significant in each country, with the exception of the decline for China. The effects for the U.S. and for China are also relatively small. For most economies, a positive shock to global uncertainty has a depressing effect on prices and official interest rates. Exceptions are Brazil, Mexico and Russia, economies with large capital outflows during financial crises. Decomposition of global uncertainty shocks shows that global financial uncertainty shocks are more important than non-financial shocks.

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Section: Introductionmentioning

confidence: 99%

The Impact of Global Uncertainty on the Global Economy, and Large Developed and Developing Economies

Kang¹,

Ratti

Vespignani

2017

SSRN Journal

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“…They also find that an increase in policy uncertainty reduces the sensitivity of investment to the cost of capital most for firms operating in industries that depend strongly on government subsidies and government consumption as well as in countries with high state ownership. Ozturk and Sheng (2018) concur, using the price informativeness channel find that an increase in policy uncertainty reduces the investment-cost of capital sensitivity for firms from more opaque countries, firms with low analyst coverage, firms with no credit rating, and small firms. Higher economic policy uncertainty leads to increases in stock volatility and investment irreversibility (Kang et al, 2014;Zhang and Lie, 2015).…”

Section: Literature Reviewmentioning

confidence: 98%

“…The study is significant for a number of reasons. In more recent years, there has been comprehensive concord and mounting evidence in literature that submit that the investment behaviour of private firms is one of the most important determinants of aggregate demand and the long-run rate of economic growth (Stokey, 2016;Drobetz et al, 2018;Ozturk and Sheng, 2018). The irreversibility of firm-level decisions under uncertainty have important implications in the understanding of aggregate domestic investment behaviour of Zimbabwe private firms.…”

Section: International Journal Of Business Economics and Managementmentioning

confidence: 99%

“…They find fiscal institutions, capacity to raise tax revenue and contain current spending and quality of public expenditure as important factors to manage uncertainty. Common uncertainty shocks produce the large and persistent negative response in real economic activity, whereas the contributions of idiosyncratic uncertainty shocks are negligible (Davis and Cairns, 2018;Efrem et al, 2018;Gupta and Jooste, 2018;Ozturk and Sheng, 2018). Similarly, Furceri et al (2018) employed productivity growth of 25 industries from 18 advanced economies over the period and examined the effect of aggregate uncertainty shocks measured by the stock market volatility on sectoral productivity.…”

Section: Literature Reviewmentioning

confidence: 99%

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Untitled

2018

International Journal of Business, Economics and Management

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Zimbabwe"s business operating environment is abounding with both micro and macro uncertainties that regularly impact on firm-level investment decisions. Under uncertainty and irreversibility private firms are forced to integrate into their investment appraisals and decisions some expectations regarding future product demand and prices, likely returns on fixed capital investment, expected margins, cost of capital expectations and cash flow projections. These important issues are not known with definitive assurance and hence, making investment decisions under uncertainty a challenging task for Zimbabwe"s private firms. The study examined investment under uncertainty and irreversibility in Zimbabwe"s private firms using a polychotomous regression model with the three investment decision outcomes; "invest now", "do not invest now" and "defer investment". The major findings are that; (1) liquidity constraints, firm size and credit constraints significantly influence the probability of investing now irrespective of uncertainties in the economy. (2) Poor public infrastructure, political uncertainty, inconsistent application of the indigenization laws and absence of laws that protect private property rights increase the probability of private firms" deferring investment decisions under uncertainty and investment irreversibility. The paper recommends that policy makers should reduce macro uncertainties in the financial sector that affect firm-level investment decisions, adopt policies that enhance productivity of public infrastructure and must observe national and international laws that safeguard investor property rights. Contribution/Originality: The study is one of the few studies that used a polychotomous probabilistic distribution function to investigate investment decisions of Zimbabwe"s private firms given the presence of uncertainty and investment irreversibility.

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“…1 Heightened uncertainty shocks tend to depress corporate investments (Gulen & Ion, 2016) and this in turn adversely affects the overall economic performance. A series of papers (Mumtaz & Theodoridis, 2015;Ozturk & Sheng, 2018; and references therein) denotes that EPU, an index of policy related uncertainty at country level, is likely to be the driving force of recession (Baker, Bloom, & Davis, 2016). They claimed that the depth and length of the crisis are determined by the level of the uncertainty, among others.…”

Section: Introductionmentioning

confidence: 99%

The International Transmission of Volatility Shocks on an Emerging Economy: The Case of Malaysia

Shah

Baharumshah

Said

et al. 2019

MJES

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This study examines the effects of global economic policy uncertainty (EPU) on Malaysia's macroeconomic indicators. Three substantive findings emerged from our inquiry based on a multivariate generalized autoregressive conditional heteroscedasticity (GARCH) model: (1) Domestic uncertainty-in nominal and real terms-seems to have no material impact on the macro-economy after controlling for global uncertainty. (2) Fluctuations in the global EPU are more important than domestic uncertainty in predicting a country's macroeconomic variables, particularly output and CPI-based inflation. The macroeconomic variables carry signs as per theoretical expectation. (3) The model predicts that external shocks exhibit a much larger impact on macroeconomic variables than those shocks originating from domestic markets. The results have deepened our insight on how the real variables correlate with external uncertainties and the fitful recovery in the recent past.

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Measuring global and country-specific uncertainty

Cited by 112 publications

References 19 publications

The Impact of Global Uncertainty on the Global Economy, and Large Developed and Developing Economies

The Impact of Global Uncertainty on the Global Economy, and Large Developed and Developing Economies

Untitled

The International Transmission of Volatility Shocks on an Emerging Economy: The Case of Malaysia

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