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Article
Publication date: 27 July 2021

Quoc Trung Tran

This paper investigates the effect of economic policy uncertainty on value of cash before and after the global financial crisis.

Abstract

Purpose

This paper investigates the effect of economic policy uncertainty on value of cash before and after the global financial crisis.

Design/methodology/approach

We investigate the relationship between economic policy uncertainty and value of excess cash based on the valuation model of Fama and French (1998). Baker et al. (2016) news-based index (BBD index) is employed to calculate measures of economic policy uncertainty. Our research sample includes 103,474 observations from 11,000 firms across 19 countries over the period 2004–2016.

Findings

We find that economic policy uncertainty is negatively “positively” related to value of cash in the pre-crisis “post-crisis” period. Moreover, we also document that the positive effect of economic policy uncertainty in the post-crisis period is stronger in financially constrained firms.

Originality/value

While prior studies find a relationship between economic policy uncertainty and cash levels or the effect of firm-level uncertainty on value of cash, this paper shows how economic policy uncertainty as an institutional environment factor affects value of cash. Moreover, it documents that economic policy uncertainty has opposite effects on value of cash before and after the global financial crisis.

研究目的

本研究旨在探討經濟政策不確定性在全球金融危機之前及之後對現金價值的影響。

研究設計/方法/理念

我們基於法馬及佛倫奇(1998) (Fama and French (1998)) 的估值模型,來探討經濟政策不確定性與過剩現金價值的關係。我們採用了貝克等人(2016) (Baker et al. (2016)) 以新聞訊息為基礎的指數 (BBD指數) 、來計算經濟政策不確定性的程度。我們的研究樣本包括橫跨19個國家、涵蓋期為2004年至2016年、取自11,000間公司之103,474個觀察。

研究結果

我們發現經濟政策不確定性與現金價值在危機前時期成負相關,在危機後時期則成正相關。而且,我們也記錄了在危機後時期經濟政策不確定性的正面影響於財務受限的公司會較大的情況。

原創性/價值

過去的研究發現了經濟政策不確定性與現金水平之間存有關係、及企業層面的不確定性對現金價值的影響。唯本研究顯示了經濟政策不確定性作為一機構環境因素,如何影響現金價值;同時,亦記錄了經濟政策不確定性在全球金融危機之前及之後對現金價值會有相反影響的情況。

Details

European Journal of Management and Business Economics, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2444-8451

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Article
Publication date: 29 April 2021

Gabriel Caldas Montes and Fabiana da Silva Leite Nogueira

This study estimates the effects of political uncertainty and economic policy uncertainty on business confidence. Moreover, it also examines business confidence as a…

Abstract

Purpose

This study estimates the effects of political uncertainty and economic policy uncertainty on business confidence. Moreover, it also examines business confidence as a transmission channel of political uncertainty and economic policy uncertainty to investment.

Design/methodology/approach

The study addresses the Brazilian case from May 2004 to December 2017. Brazil experienced situations of political instability and public distrust in government and its policies, which reflected on the economic environment. The study uses two business confidence indicators that capture entrepreneurs' sentiment in relation to their business and the economy. All models are estimated using ordinary least squares and generalized method of moments.

Findings

The estimates reveal that increases in both political uncertainty and economic policy uncertainty reduce business confidence. The findings also indicate that business confidence acts as a transmission mechanism, i.e. uncertainties affect investments through business confidence.

Practical implications

The findings point to the following practical implications related to the existence of uncertainties in the Brazilian economy: different institutional difficulties and government indecisions have blurred the political scene and caused political uncertainties. In addition, the same aspects that blurred the political scene also caused uncertainties in relation to economic policy that undermined business confidence, and affected investment.

Originality/value

There is a vast literature on business confidence, as well as studies addressing the relationship between business confidence and investment. This study differs from other studies as follows: in addition to the political uncertainty, it also analyzes the effect of economic policy uncertainty on business confidence; it uses different measures to capture political instability, and it analyzes whether business confidence acts as a transmission channel of both uncertainties to investments.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 24 May 2007

Frederic Carluer

“It should also be noted that the objective of convergence and equal distribution, including across under-performing areas, can hinder efforts to generate growth

Abstract

“It should also be noted that the objective of convergence and equal distribution, including across under-performing areas, can hinder efforts to generate growth. Contrariwise, the objective of competitiveness can exacerbate regional and social inequalities, by targeting efforts on zones of excellence where projects achieve greater returns (dynamic major cities, higher levels of general education, the most advanced projects, infrastructures with the heaviest traffic, and so on). If cohesion policy and the Lisbon Strategy come into conflict, it must be borne in mind that the former, for the moment, is founded on a rather more solid legal foundation than the latter” European Commission (2005, p. 9)Adaptation of Cohesion Policy to the Enlarged Europe and the Lisbon and Gothenburg Objectives.

Details

Managing Conflict in Economic Convergence of Regions in Greater Europe
Type: Book
ISBN: 978-1-84950-451-5

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Book part
Publication date: 26 November 2019

Dipyaman Pal, Chandrima Chakraborty and Arpita Ghose

The present study aims to determine the existence of simultaneous relationship between economic growth, income inequality, fiscal policy, and total trade of the 13…

Abstract

The present study aims to determine the existence of simultaneous relationship between economic growth, income inequality, fiscal policy, and total trade of the 13 emerging market economies as a group for the period 1980–2010. After establishing the existence of simultaneity between the above relationships, a simultaneous panel model has been formulated and estimated incorporating the nonlinearity among the variables as suggested by the existing literature. An inverted U-shape relationship is evident between (1) economic growth, income inequality, and total trade in economic growth equation, (2) income inequality, economic growth, and per capita income in income inequality equation, and (3) total trade and economic growth in total trade equation. Thus, the existence of a two-way nonlinear relationship is highlighted between economic growth, income inequality, and total trade. Apart from these nonlinear relationships, positive and significant effect of (1) gross capital formation, inflation, population growth, human capital, fiscal policy, monetary policy, and domestic credit to private sector on economic growth; (2) civil liabilities on income inequality; (3) gross capital formation and inflation on total trade; (4) total trade, population growth of those aged 65 years and above, political system on fiscal policy is highlighted. Also, negative and significant effect of (1) fiscal policy on income inequality and (2) income inequality on fiscal policy is revealed.

Details

The Gains and Pains of Financial Integration and Trade Liberalization
Type: Book
ISBN: 978-1-83867-004-7

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Article
Publication date: 26 August 2020

Abobaker Al.Al. Hadood and Farid Irani

This paper considers the role of economic sentiment and economic policy uncertainty (both domestic and European) in explaining the changes in the contemporaneous and…

Abstract

Purpose

This paper considers the role of economic sentiment and economic policy uncertainty (both domestic and European) in explaining the changes in the contemporaneous and future travel and leisure stock index returns in top European Union (EU) tourism destinations, namely, in France, Germany, Spain and the UK.

Design/methodology/approach

The authors conducted the ordinary least square (OLS) regression estimations to investigate the impact of changes in economic sentiment and economic policy uncertainty on travel and leisure stock returns. Furthermore, the authors used predictive regressions to determine whether economic sentiment and economic policy uncertainty are useful predictors over the short- or medium-term for travel and leisure stock returns.

Findings

Empirical results revealed that, in France and Spain, the changes in regional economic sentiments predominantly and positively affected travel and leisure stock index returns. Also, results indicated that changes in European economic sentiment have a strong positive effect on the future travel and leisure stock returns in Spain and the UK over the short run, while in France, changes in European economic policy uncertainty have a weak negative effect on the future travel and leisure stock returns over the medium-term.

Research limitations/implications

This paper provides valuable practical implications for investors who trade travel and leisure stocks. Traders can use economic sentiment and economic policy uncertainty to establish arbitrageur strategies.

Originality/value

This study is the first to examine the effects of economic sentiment and economic policy uncertainty (both domestic and European) on contemporaneous and future travel and leisure stock returns in a top European tourism destination.

Details

Journal of Hospitality and Tourism Insights, vol. 4 no. 1
Type: Research Article
ISSN: 2514-9792

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Article
Publication date: 1 June 1982

A.G. Malliaris

The creation and growth of economic integration as an area of economics is the result primarily of practical rather than academic interest. Although economic nationalism…

Abstract

The creation and growth of economic integration as an area of economics is the result primarily of practical rather than academic interest. Although economic nationalism and antagonism still prevail as the basic form of world economic order, economic history presents us with specific examples and ambitious plans of economic co‐operation and integration. The example of the US is often cited as a classic case study in economic integration. Viner presented a detailed list of conventions, decrees, etc., concerning customs unions. The French Declaration of May 9, 1950, which led to the formation of the European Coal and Steel Community, manifested for the first time the willingness of a government to overcome old antagonisms and to adopt a programme for European integration. The Treaty of Rome and the establishment of the European Economic Community is another example of the trend towards economic integration among industrialised countries of the West, while COMECON is the primary integration attempt by various centrally planned economies of the Soviet bloc. With respect to less developed countries, the world has experienced a number of ambitious schemes such as the Latin America Free Trade Association, the Central American Common Market, the East African Community, the West African Association, the South African Customs Union, the Arab Common Market, the Southeast Asia Economic Treaty, the Andean Common Market, the Carribean Community and others.

Details

International Journal of Social Economics, vol. 9 no. 6/7
Type: Research Article
ISSN: 0306-8293

Content available
Article
Publication date: 2 December 2019

Conglai Fan and Gao Jiechao

In recent years, with the gradual differentiation of economic and financial cycles, it has been increasingly difficult for monetary policies to remain balanced in…

Abstract

Purpose

In recent years, with the gradual differentiation of economic and financial cycles, it has been increasingly difficult for monetary policies to remain balanced in stabilizing both economy and finance. Taking the period of 1999–2017 as a sample, the purpose of this paper is to find whether the synergy between the growth cycle and the price cycle is constantly improving in the economic cycle is more appropriate.

Design/methodology/approach

The key to stabilizing the economic cycle lies in the monetary policy and it should abandon the goal of boosting growth in a timely manner and turn into the goal of maintaining steady growth. At present, quantitative monetary policy is still more effective than price-oriented monetary policy in smoothing the economic cycle.

Findings

The impact of quantitative regulation on the financial cycle is more neutral, whereas price regulation will increase the volatility of price and financial cycles in the course of smoothing the growth cycle. In view of the continuous differentiation between the economic and financial cycles, it is realistic and reasonable to accelerate the establishment of a sound dual-pillar regulatory framework of “monetary policy and macro-prudential policy.”

Originality/value

The macro-prudential policy is specially used to smooth the financial cycle, so as to reduce the burden and increase the efficiency of the monetary policy on regulating economic cycle. Moreover, the transformation of monetary policy to price-oriented regulation must keep pace with the construction of the dual-pillar regulation framework and complement each other to prevent undesirable consequences in the financial sector. On the other hand, monetary policy still needs to rely on quantitative regulation in the future. The research in this paper also provides a new perspective for understanding the internal and external reform of China’s monetary policy in recent years.

Details

China Political Economy, vol. 2 no. 2
Type: Research Article
ISSN: 2516-1652

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Article
Publication date: 26 July 2013

Gabriel Caldas Montes and Júlio Cesar Albuquerque Bastos

The purpose of this paper is to analyze the influence of macroeconomic variables and economic policies on expectations and confidence of entrepreneurs. It provides an…

Abstract

Purpose

The purpose of this paper is to analyze the influence of macroeconomic variables and economic policies on expectations and confidence of entrepreneurs. It provides an econometric analysis of the expectation transmission channel under inflation targeting in Brazil, emphasizing the effect of inflation targeting credibility on the business confidence of industrial entrepreneurs.

Design/methodology/approach

Based on ordinary least square (OLS), generalized method of moments (GMM) and vector autoregression (VAR), the paper provides empirical evidence about the influence of inflation targeting credibility and macroeconomic policies on expectations and confidence of entrepreneurs and, as a consequence, on industrial production.

Findings

The evidence for the Brazilian economy suggest that monetary and fiscal policies as well as the credibility of the monetary regime affect economic activity by their impact on expectations of entrepreneurs.

Research limitations/implication

Development of macroeconomic stability is important to the expectations formed by entrepreneurs and, therefore, for industrial production. In particular, inflation targeting credibility stimulates industrial production, since it increases the confidence of entrepreneurs about the functioning of the economy and their businesses.

Originality/value

The results suggest new insights about the influence of economic policies on the real side of the economy, pointing out that the conduct of economic policies in emerging countries with inflation targets are likely to affect the expectations of entrepreneurs and therefore their production decisions.

Details

Journal of Economic Studies, vol. 40 no. 3
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 March 1985

Tomas Riha

Nobody concerned with political economy can neglect the history of economic doctrines. Structural changes in the economy and society influence economic thinking and…

Abstract

Nobody concerned with political economy can neglect the history of economic doctrines. Structural changes in the economy and society influence economic thinking and, conversely, innovative thought structures and attitudes have almost always forced economic institutions and modes of behaviour to adjust. We learn from the history of economic doctrines how a particular theory emerged and whether, and in which environment, it could take root. We can see how a school evolves out of a common methodological perception and similar techniques of analysis, and how it has to establish itself. The interaction between unresolved problems on the one hand, and the search for better solutions or explanations on the other, leads to a change in paradigma and to the formation of new lines of reasoning. As long as the real world is subject to progress and change scientific search for explanation must out of necessity continue.

Details

International Journal of Social Economics, vol. 12 no. 3/4/5
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 1 August 1999

Peter R. Senn

The focus of this paper is the economic theory of the plans for the European Monetary Union. Part 1 demonstrates that economists, bankers and policy makers know very…

Abstract

The focus of this paper is the economic theory of the plans for the European Monetary Union. Part 1 demonstrates that economists, bankers and policy makers know very little about monetary policy. Part 2 explains the errors of the common practice of defining money by its functions. Because any monetary policy must rest on a definition of money it seems reasonable to conclude that a flawed definition might lead to problems with monetary policy. Part 3 applies this insight to the plans for a common currency in Europe. Because of uncertainties about the timing and details of the implementation, some important considerations are necessarily speculative. They are relegated to appendices. Appendix 1 comments on the timing and authorship and responsibility for the official reports with their unspecified authors. Appendix 2 supplies some grounds for doubting the ultimate durability of the European Monetary Union focusing on reasons that are historical, economic and pragmatic. Because the entire movement is driven by politics, not economics, Appendix 3 considers some of the relevant political issues. The conclusions summarize and speculate on possible reasons for successful outcomes.

Details

Journal of Economic Studies, vol. 26 no. 4/5
Type: Research Article
ISSN: 0144-3585

Keywords

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