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Global Uncertainty and Global Economic Policy Uncertainty: Different Implications for Firm Investment

Author

Listed:
  • Hyunduk Suh

    (Inha University)

  • Jin Young Yang

    (Zayed University)

Abstract

Global Economic Policy Uncertainty (EPU) and non-EPU global uncertainty measures exhibit heterogenous behavior, especially in 2010s. Using firm-level data from 36 countries, we estimate the effect of global uncertainty on corporate investment in 1997-2016. Eleven global uncertainty measures, including global EPU, are employed to encompass macro, micro, and higher-order dimensions of uncertainty. We find different effect of EPU and non-EPU global uncertainty measures on investment. Only EPU measures negatively affect investment, while non-EPU measures have positive effects. The negative effects of EPU measures on investment are stronger for firms with high investment irreversibility and high leverage, but no such effect is observed from non-EPU measures.

Suggested Citation

  • Hyunduk Suh & Jin Young Yang, 2020. "Global Uncertainty and Global Economic Policy Uncertainty: Different Implications for Firm Investment," Inha University IBER Working Paper Series 2020-1, Inha University, Institute of Business and Economic Research.
    • Handle: RePEc:inh:wpaper:2020-1
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    2. Noura Abu Asab, 2024. "Investment Amid Uncertainty: Exchange Rates and Oil Price Dynamics in Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 14(6), pages 641-650, November.
    3. Zahid Jumah & Nabeel Safdar & Zahid Irshad Younas & Adeel Ahmed, 2024. "Economic policy uncertainty, corporate diversification and firm value: the global evidence," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(3), pages 2677-2707, June.
    4. Vasilii Erokhin & Alexey Bobryshev & Gao Tianming & Nelly Agafonova & Marina Sidorova & Natalya Malinovskaya & Nina Zargaryan, 2025. "Determining the Composition of Integrated Reporting Indicators Under Uncertainty: The Innovation-Based Convergence of Economic, Managerial, Social, and Environmental Contexts," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(3), pages 13393-13428, September.
    5. de la Horra, Luis P. & Perote, Javier & de la Fuente, Gabriel, 2022. "The impact of economic policy uncertainty and monetary policy on R&D investment: An option pricing approach," Economics Letters, Elsevier, vol. 214(C).
    6. Yuanting Xia & Wenxiu Hu & Zhenxing Su, 2022. "Economic Policy Uncertainty, Social Financing Scale and Local Fiscal Sustainability: Evidence from Local Governments in China," Sustainability, MDPI, vol. 14(12), pages 1-19, June.
    7. Feng, Zhuozhao & Lin, Juan, 2023. "Macroeconomic uncertainty and firms’ investment in China," Economics Letters, Elsevier, vol. 226(C).
    8. Nekhili, Ramzi & Mensi, Walid & Vo, Xuan Vinh, 2021. "Multiscale spillovers and connectedness between gold, copper, oil, wheat and currency markets," Resources Policy, Elsevier, vol. 74(C).
    9. Tran, Ly Thi Hai, 2025. "China's economic policy uncertainty and firm-level investment in Southeast Asian economies: The role of trade connection and financial development," Global Finance Journal, Elsevier, vol. 65(C).
    10. Masayuki MORIKAWA, 2022. "Firms' Knightian Uncertainty during the COVID-19 Crisis," Discussion papers 22089, Research Institute of Economy, Trade and Industry (RIETI).
    11. Jin, Shan & Hoang, Khanh & Gan, Christopher & Nguyen, Quang Thi Thieu & Anh, Dao Le Trang, 2025. "Russo-Ukrainian geopolitical tensions: An empirical analysis of corporate investment in Europe," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    12. Benjamin Baker & Murat Üngör, 2025. "Effects of Quantitative Easing on Economic Sentiment: Evidence from Three Large Economies," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 67(1), pages 50-83, March.
    13. Hossain Mohammad Reyad & Mohd Ashhari Zariyawati & Tze San Ong & Haslinah Muhamad, 2022. "The Impact of Macroeconomic Risk Factors, the Adoption of Financial Derivatives on Working Capital Management, and Firm Performance," Sustainability, MDPI, vol. 14(21), pages 1-19, November.
    14. Hwang, So Jung & Suh, Hyunduk, 2021. "Overall and time-varying effects of global and domestic uncertainty on the Korean economy," Journal of Asian Economics, Elsevier, vol. 76(C).

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F30 - International Economics - - International Finance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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