Measuring Co-Dependencies of Economic Policy Uncertainty in Latin American Countries using Vine Copulas

We analyze the dependence structure of economic policy uncertainty in four Latin American economies (Brazil, Chile, Colombia, Mexico) using vine copula modeling with various forms of tail dependence. Our results suggest that there are significant dependencies in economic uncertainty among the economies considered. We also find that tail dependence is more prevalent in the period preceding the Global Financial Crisis and becomes less relevant in the post-crisis period. Previous works suggest that uncertainty in economic activity can have substantial effects on economic issues ranging from business cycles to contagion effects of financial crises. Due to this relevance, our results have significant implications on the analysis of a range of macroeconomic issues, especially for emerging economies.