Economic Policy Uncertainty in Turkey

37 Pages Posted: 14 Jan 2019

See all articles by La-Bhus Fah Jirasavetakul

La-Bhus Fah Jirasavetakul

International Monetary Fund (IMF)

Antonio Spilimbergo

International Monetary Fund (IMF) - Research Department; Centre for Economic Policy Research (CEPR); University of Michigan at Ann Arbor - The William Davidson Institute

Multiple version iconThere are 2 versions of this paper

Date Written: December 2018

Abstract

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.

Keywords: Turkey, Europe, Policy uncertainty, economic uncertainty, firm-level, sector-level, investment decisions, employment growth, leverage strategies, diff-in-diff estimation, General, General, General Outlook and Conditions, General

JEL Classification: D20, D80, E22, E66, L20, M51

Suggested Citation

Jirasavetakul, La-Bhus Fah and Spilimbergo, Antonio, Economic Policy Uncertainty in Turkey (December 2018). IMF Working Paper No. 18/272, Available at SSRN: https://ssrn.com/abstract=3314607

La-Bhus Fah Jirasavetakul (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Antonio Spilimbergo

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6346 (Phone)
202-623-6336 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Michigan at Ann Arbor - The William Davidson Institute ( email )

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

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