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Time-frequency analysis of economic policy uncertainty and its relationship with exchange rates: application to Latin American countries, 2010 - 2022

Author

Listed:
  • José Aicardo Rúa

    (Universidad de Medellín)

  • Nini Johana Marín-Rodríguez

    (Universidad de Medellín)

Abstract

This paper offers a fresh perspective on the relationship between the Economic Policy Uncertainty (EPU) index and exchange rates in Latin American countries (Brazil, Chile, Colombia, and Mexico). Employing Wavelet Power Spectrum and Coherence Analyses on monthly data (January 2010 to May 2022). The findings reveal a consistent positive correlation between the EPU index and exchange rates across short, medium, and long-term. These results underscore the intricate link between economic uncertainty and exchange rates, emphasizing the need for careful economic policy management and consideration of political events to foster stability and economic growth in these nations

Suggested Citation

  • José Aicardo Rúa & Nini Johana Marín-Rodríguez, 2024. "Time-frequency analysis of economic policy uncertainty and its relationship with exchange rates: application to Latin American countries, 2010 - 2022," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 102, pages 93-131, November.
    • Handle: RePEc:lde:journl:y:2024:i:102:p:93-131
    DOI: 10.17533/udea.le.n102a356728
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    References listed on IDEAS

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    1. Bush, Georgia & López Noria, Gabriela, 2021. "Uncertainty and exchange rate volatility: Evidence from Mexico," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 704-722.
    2. Hyeon‐seung Huh & David Kim, 2021. "The risk‐taking channel of currency appreciation: A structural VAR investigation of Asian emerging market economies," International Finance, Wiley Blackwell, vol. 24(3), pages 313-331, December.
    3. Grier, Robin & Grier, Kevin B., 2006. "On the real effects of inflation and inflation uncertainty in Mexico," Journal of Development Economics, Elsevier, vol. 80(2), pages 478-500, August.
    4. Richard Eshun & George Tweneboah, 2024. "Exchange rates convergence in ECOWAS: WAMZ and WAEMU analysis on frequency time domains," Cogent Business & Management, Taylor & Francis Journals, vol. 11(1), pages 2374873-237, December.
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    Keywords

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    JEL classification:

    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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