How economic policy uncertainty spreads across borders: the case of Latin America

Erik Andres-Escayola, Luis Molina, Javier J. Pérez and Elena Vidal
Additional contact information
Erik Andres-Escayola: UNIVERSITY OF ALICANTE
Luis Molina: BANCO DE ESPAÑA
Javier J. Pérez: BANCO DE ESPAÑA
Elena Vidal: BANCO DE ESPAÑA

No 2549, Working Papers from Banco de España

Abstract: Latin America’s growth has been hindered by institutional instability and volatile economic policies, often driven by political cycles. These shifts generate uncertainty that deters investment and disrupts productivity. We analyze this phenomenon using Economic Policy Uncertainty (EPU) indices, assessing their impact on domestic macroeconomic variables via regional spillovers - spurred by regional proximity - and also considering the global transmission of EPU shocks to key trade and financial partners. To do so, we assemble a comprehensive and comparable database of EPU indices for the region: first, we construct new indices for Bolivia, Ecuador, Paraguay, Uruguay and Venezuela, and second, we update the ones available in other papers for Argentina, Brazil, Chile, Colombia, Mexico and Peru using a comparable methodology. Our results show that: (i) regional EPU shocks reduce regional GDP growth, deter capital inflows and spark exchange rate instability; (ii) Brazil and Mexico are key sources of uncertainty spillovers within the region; and (iii) EPU shocks in Latin America affect financial and real variables in major partner economies, with Spain being particularly exposed.

Keywords: economic policy uncertainty; textual analysis; Latin America; spillovers (search for similar items in EconPapers)
JEL-codes: C43 D80 E32 O11 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2025-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bde.es/f/webbe/SES/Secciones/Publicaci ... 25/Files/dt2549e.pdf First version, December 2025 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2549

DOI: 10.53479/41984

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().