The Role of Economic Policy Uncertainty in Predicting Output Growth in Emerging Markets: A Mixed-Frequency Granger Causality Approach

Mehmet Balcilar, George Ike and Rangan Gupta

Emerging Markets Finance and Trade, 2022, vol. 58, issue 4, 1008-1026

Abstract: We employ time series data to empirically determine the causal relationship between economic policy uncertainty and the GDP growth rates of seven emerging market economies while controlling for the effect of oil price, interest rates, and the CPI. Due to differences in sampling frequencies between the GDP series and other variables, a multi-horizon mixed frequency VAR model is specified. This model fully exploits the recently developed mixed frequency Granger causality test in order to circumvent the distorting effects of temporal aggregation. The empirical results show a strong statistical evidence for causality flowing from EPU to GDP in Brazil, Chile, and India in the mixed frequency case while weak statistical evidence is found for Colombia, Mexico, and Russia. For comparative analysis, the low-frequency Granger causality test is also employed and strong statistical evidence of causality flowing from EPU to GDP in Brazil, Chile, India, Mexico is uncovered. Analyzing the causal patterns uncovered in both specifications show that the low-frequency Granger causality results are less intuitively appealing than those that are obtained from the mixed frequency Granger causality test specifications. The results have empirical as well as policy implications which are discussed.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2020.1860747 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Role of Economic Policy Uncertainty in Predicting Output Growth in Emerging Markets: A Mixed-Frequency Granger Causality Approach (2019)
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:mes:emfitr:v:58:y:2022:i:4:p:1008-1026

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2020.1860747

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().