All books bought on the website can only be read on the app. Download Jackobian to have access to your materials
This study investigated the asymmetric effects of changes in policy uncertainty on real sector
variables in Brazil, China, India and South Africa.
Design/methodology/approach – The study used the nonlinear autoregressive distributed lag (NARDL)
modeling framework.
Findings – The results showed that both in the long run and short run, rising uncertainty not only
increases consumer prices significantly in these economies, but also impedes aggregate and sectoral output
growths, and deters investment, employment and private consumption. Contrary to economic expectation,
the results also showed that in the long run, declining uncertainty impedes aggregate and sectoral output
growths in these economies, and significantly hinders employment in South Africa and Brazil. This
suggests that in the long run, economic agents in these economies somewhat behave as if uncertainty is
rising. The authors also found significant asymmetric effects in the response of real sector variables to
uncertainty both in the long run and short run, which justifies the choice of NARDL framework for
this study.
The sample is limited to Brazil, India, China and South Africa. While
Brazil, India and China are three of the most prominent large emerging market economies, South Africa is the
largest emerging market economy in Africa.
To lessen the adverse effects of policy uncertainty observed in the results, there is
need for sound institutions and policy regimes that can promote predictable policy responses in these
economies so that policy neither serves as a source of uncertainty nor as a channel through which the effects of
other shocks are transmitted.
Apart from using the NARDL framework to capture the asymmetric effects of policy
uncertainty, this study also accounted for the sectoral effects of uncertainty in emerging markets.
