Time-frequency analysis of economic policy uncertainty and its relationship with exchange rates: application to Latin American countries, 2010 - 2022
DOI:
https://doi.org/10.17533/udea.le.n102a356728Keywords:
Time-frequency analysis, Financial Econometrics, Foreign Exchange, Financial Risk, Uncertainty, Latin AmericaAbstract
This paper offers a fresh perspective on the relationship between the Economic Policy Uncertainty (EPU) index and exchange rates in Latin American countries (Brazil, Chile, Colombia, and Mexico). Employing Wavelet Power Spectrum and Coherence Analyses on monthly data (January 2010 to May 2022). The findings reveal a consistent positive correlation between the EPU index and exchange rates across short, medium, and long-term. These results underscore the intricate link between economic uncertainty and exchange rates, emphasizing the need for careful economic policy management and consideration of political events to foster stability and economic growth in these nations
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