Policy Uncertainty in Japan
By Elif C. Arbatli, Steven J. Davis, Arata Ito, Naoko Miake. Social Science Research Network, 2017
189 citations recorded by the source corpus.
We develop new economic policy uncertainty (EPU) indices for Japan from January 1987 onwards, building on the approach of Baker, Bloom and Davis (2016). Each index reflects the frequency of newspaper articles that contain certain terms pertaining to the economy, policy matters, and uncertainty. Our overall EPU index co-varies positively with implied volatilities for Japanese equities, exchange rates and interest rates and with a survey-based measure of political uncertainty. The EPU index rises around contested national elections and major leadership transitions in Japan, during the Asian financial crisis and in reaction to the Lehman Brothers failure, U.S. debt downgrade in 2011, Brexit referendum, and Japan’s deferral of a consumption tax hike. Our uncertainty indices for fiscal, monetary, trade, and exchange rate policy co-vary positively but also display distinct dynamics. For example, our trade policy uncertainty (TPU) index rocketed upwards when the U.S. withdrew from the Trans-Pacific Partnership in January 2017. VAR models imply that upward EPU innovations foreshadow deteriorations in Japan’s macroeconomic performance, as reflected by impulse response functions for investment, employment and output. Our study adds to evidence that credible policy plans and strong policy frameworks can favorably influence macroeconomic performance by, in part, reducing policy uncertainty.
View Paper: https://www.semanticscholar.org/paper/5d61cda2b445c076aeaff8b358675afa82d6a1b7
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Citations in the corpus
- On the transmission mechanism of country-specific and international economic uncertainty spillovers: Evidence from a TVP-VAR connectedness decomposition approach (2018, methodology): “We compile a dataset of monthly news-based economic policy uncertainty indices for the US and Japan at the categorical level involving monetary policy uncertainty (MPU), fiscal policy uncertainty (FPU), trade policy uncertainty (TPU), and currency market-related policy uncertainty (CPU), based on th”
- Economic policy uncertainty and economic activity in Turkey (2018, background): “Building on the methods in Baker, Bloom, and Davis (2016), there are several other studies that developed EPU indices for Japan (Arbatli et al. 2017), Chile (Cerda, Silva, and Valente 2016), Ireland (Zalla 2017), South Africa (Hlatshwayo and Saxegaard 2016), The Netherlands (Kroese, Kok, and…”