Global uncertainty and Global Economic Policy Uncertainty: Different implications for firm investment

Global Economic Policy Uncertainty (EPU) and non-EPU global uncertainty measures exhibit heterogeneous 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, which suggests a possible first-order implication of EPU. (c) 2021 Elsevier B.V. All rights reserved.

Automated summary

The study reveals that global Economic Policy Uncertainty (EPU) and non-EPU global uncertainty measures have different effects on corporate investment, with EPU measures negatively affecting investment and non-EPU measures having positive effects.