The effect of economic policy uncertainty under fractional integration
Autor(a) principal: | |
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Data de Publicação: | 2024 |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.5/29961 |
Resumo: | One of the most popular measures of economic policy uncertainty (EPU) is an in dex based on newspapers coverage of particular keywords. The constructed index is often then included in vector autoregression (VAR) models to examine the extent to which EPU affects economic activity. Researchers, however, have not investigated how the possibility of fractional integration in this index may affect the results. Under fractional integration, the effects of EPU on output in a standard VAR setting may be biased. After confirming that all EPU series posted in policyuncertainty.com are fractionally integrated processes, I estimate a fractionally cointegrated VAR (FCVAR) model to evaluate the dynamic effects of EPU. Likelihood ratio tests in dicate that fractional cointegration cannot be rejected at low lag orders. In addition, I investigate the effect of EPU on output after applying various filters to remove the long-memory component. While I still find that EPU imparts a negative effect on output, relative to Baker et al. (2016)’s results, the effects tend to be smaller in magnitude. Treating long memory, therefore, is important for accurate estimation of the dynamic effects. |
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The effect of economic policy uncertainty under fractional integrationEconomic policy uncertaintyFractional integrationFractionally cointegrated VARLong-memoryOne of the most popular measures of economic policy uncertainty (EPU) is an in dex based on newspapers coverage of particular keywords. The constructed index is often then included in vector autoregression (VAR) models to examine the extent to which EPU affects economic activity. Researchers, however, have not investigated how the possibility of fractional integration in this index may affect the results. Under fractional integration, the effects of EPU on output in a standard VAR setting may be biased. After confirming that all EPU series posted in policyuncertainty.com are fractionally integrated processes, I estimate a fractionally cointegrated VAR (FCVAR) model to evaluate the dynamic effects of EPU. Likelihood ratio tests in dicate that fractional cointegration cannot be rejected at low lag orders. In addition, I investigate the effect of EPU on output after applying various filters to remove the long-memory component. While I still find that EPU imparts a negative effect on output, relative to Baker et al. (2016)’s results, the effects tend to be smaller in magnitude. Treating long memory, therefore, is important for accurate estimation of the dynamic effects.SpringerRepositório da Universidade de LisboaRamirez, Carlos D.2024-01-26T10:41:36Z20242024-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/29961engRamirez, Carlos D. (2024). "The effect of economic policy uncertainty under fractional integration". Portuguese Economic Journal, 23(1):89-1101617-9838 (electronic)10.1007/s10258-022-00233-ymetadata only accessinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-01-28T01:34:47Zoai:www.repository.utl.pt:10400.5/29961Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T01:58:23.709220Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
The effect of economic policy uncertainty under fractional integration |
title |
The effect of economic policy uncertainty under fractional integration |
spellingShingle |
The effect of economic policy uncertainty under fractional integration Ramirez, Carlos D. Economic policy uncertainty Fractional integration Fractionally cointegrated VAR Long-memory |
title_short |
The effect of economic policy uncertainty under fractional integration |
title_full |
The effect of economic policy uncertainty under fractional integration |
title_fullStr |
The effect of economic policy uncertainty under fractional integration |
title_full_unstemmed |
The effect of economic policy uncertainty under fractional integration |
title_sort |
The effect of economic policy uncertainty under fractional integration |
author |
Ramirez, Carlos D. |
author_facet |
Ramirez, Carlos D. |
author_role |
author |
dc.contributor.none.fl_str_mv |
Repositório da Universidade de Lisboa |
dc.contributor.author.fl_str_mv |
Ramirez, Carlos D. |
dc.subject.por.fl_str_mv |
Economic policy uncertainty Fractional integration Fractionally cointegrated VAR Long-memory |
topic |
Economic policy uncertainty Fractional integration Fractionally cointegrated VAR Long-memory |
description |
One of the most popular measures of economic policy uncertainty (EPU) is an in dex based on newspapers coverage of particular keywords. The constructed index is often then included in vector autoregression (VAR) models to examine the extent to which EPU affects economic activity. Researchers, however, have not investigated how the possibility of fractional integration in this index may affect the results. Under fractional integration, the effects of EPU on output in a standard VAR setting may be biased. After confirming that all EPU series posted in policyuncertainty.com are fractionally integrated processes, I estimate a fractionally cointegrated VAR (FCVAR) model to evaluate the dynamic effects of EPU. Likelihood ratio tests in dicate that fractional cointegration cannot be rejected at low lag orders. In addition, I investigate the effect of EPU on output after applying various filters to remove the long-memory component. While I still find that EPU imparts a negative effect on output, relative to Baker et al. (2016)’s results, the effects tend to be smaller in magnitude. Treating long memory, therefore, is important for accurate estimation of the dynamic effects. |
publishDate |
2024 |
dc.date.none.fl_str_mv |
2024-01-26T10:41:36Z 2024 2024-01-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.5/29961 |
url |
http://hdl.handle.net/10400.5/29961 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Ramirez, Carlos D. (2024). "The effect of economic policy uncertainty under fractional integration". Portuguese Economic Journal, 23(1):89-110 1617-9838 (electronic) 10.1007/s10258-022-00233-y |
dc.rights.driver.fl_str_mv |
metadata only access info:eu-repo/semantics/openAccess |
rights_invalid_str_mv |
metadata only access |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Springer |
publisher.none.fl_str_mv |
Springer |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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