EconPapers    
Economics at your fingertips  
 

Macroeconomic effects of uncertainty shocks: Evidence from Korea

Dooyeon Cho and Husang Kim

Journal of Asian Economics, 2023, vol. 84, issue C

Abstract: This paper proposes a new measure of economic policy uncertainty (EPU) for Korea by fine-tuning the keywords and exploiting information drawn from a wide variety of local newspapers. The uniqueness of our new EPU index lies mainly in the fact that it uses a set of keywords that correspond much more closely to actual language use and better reflect the economic environment of Korea, which is classified as a small open economy. After shocks to EPU being identified, we employ these shocks to estimate the impulse responses using local projections. Unlike the existing measure, our results show that shocks to EPU lead to a significant decline in macroeconomic aggregates such as output, consumption, investment, and employment. Thus our results suggest a refinement of the EPU index in general for other countries accordingly. We also develop policy-specific uncertainty indices and show that they capture important historical events related to the corresponding policies, such as monetary and fiscal measures.

Keywords: Economic policy uncertainty; Uncertainty shocks; Local projections (search for similar items in EconPapers)
JEL-codes: C43 E32 E66 G18 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1049007822001270
Full text for ScienceDirect subscribers only

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:eee:asieco:v:84:y:2023:i:c:s1049007822001270

DOI: 10.1016/j.asieco.2022.101571

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2024-03-31
Handle: RePEc:eee:asieco:v:84:y:2023:i:c:s1049007822001270