TY - JOUR
T1 - IMPACT OF US ECONOMIC POLICY ON MAJOR LATIN AMERICA’S STOCK MARKETS, 2002-2020
AU - Coronado, Semei
AU - Martínez, José N.
AU - Venegas-Martínez, Francisco
N1 - Publisher Copyright:
© 2022 Universidad Nacional Autonoma de Mexico. All rights reserved.
PY - 2022
Y1 - 2022
N2 - US Economic Policy Uncertainty (usepu) represents a risk in which government policies and regulatory frameworks are not clearly defined for the near future. This phenomenon can generate negative effects around the world by delaying the investments of corporations and investors in stock markets, which in turn affects economic activity. This article assesses the impact of the usepu on the main stock exchanges in Latin America (Chile, Brazil, Mexico and Colombia). To do this, a Time-Varying Bayesian Structural Vector Autoregressive model is applied. Data is obtained from Bloomberg for the period 2002-2020. The main empirical results obtained are that a usepu shock initially affects returns negatively and then its effect turns positive, with a peak around three months, for Chile’s ipsa (Índice de Precios Selectivo de Acciones) index, Brazil’s ibov (abbreviated name of ibovespa, Índice da Bolsa de Valores de São Paulo) index and Mexico’s mexbol (Mexican Bolsa) index. The same happens on a smaller scale with Colombia’s colcap (Colombia Capital) index. The shock completely dissipates after two years for all countries. A Time-Varying Granger Causality test corroborates the above results. Finally, the consequences of the usepu for emerging countries with similar characteristics are discussed and several policy recommendations focused on reducing the impact are provided.
AB - US Economic Policy Uncertainty (usepu) represents a risk in which government policies and regulatory frameworks are not clearly defined for the near future. This phenomenon can generate negative effects around the world by delaying the investments of corporations and investors in stock markets, which in turn affects economic activity. This article assesses the impact of the usepu on the main stock exchanges in Latin America (Chile, Brazil, Mexico and Colombia). To do this, a Time-Varying Bayesian Structural Vector Autoregressive model is applied. Data is obtained from Bloomberg for the period 2002-2020. The main empirical results obtained are that a usepu shock initially affects returns negatively and then its effect turns positive, with a peak around three months, for Chile’s ipsa (Índice de Precios Selectivo de Acciones) index, Brazil’s ibov (abbreviated name of ibovespa, Índice da Bolsa de Valores de São Paulo) index and Mexico’s mexbol (Mexican Bolsa) index. The same happens on a smaller scale with Colombia’s colcap (Colombia Capital) index. The shock completely dissipates after two years for all countries. A Time-Varying Granger Causality test corroborates the above results. Finally, the consequences of the usepu for emerging countries with similar characteristics are discussed and several policy recommendations focused on reducing the impact are provided.
KW - Bayesian estimation
KW - Economic policy uncertainty
KW - econometric models
KW - emerging stock markets
UR - http://www.scopus.com/inward/record.url?scp=85130620429&partnerID=8YFLogxK
U2 - 10.22201/FE.01851667P.2022.320.81132
DO - 10.22201/FE.01851667P.2022.320.81132
M3 - Artículo
AN - SCOPUS:85130620429
SN - 0185-1667
VL - 81
SP - 62
EP - 80
JO - Investigacion Economica
JF - Investigacion Economica
IS - 320
ER -