Global Uncertainty Shocks and Exchange-Rate Expectations in Latin America

ECONOMIC MODELLING
Publicado: 
Clasificación JEL: 
C53, F31, F37

Lo más reciente

Julián Alonso Cárdenas-Cárdenas, Deicy Johana Cristiano-Botia, Eliana Rocío González-Molano, Carlos Alfonso Huertas-Campos
Luis E. Arango, Juan José Ospina-Tejeiro, Fernando Arias-Rodríguez, Oscar Iván Ávila-Montealegre, Jaime Andrés Collazos-Rodríguez, Diana M. Cortázar Gómez, Juan Pablo Cote-Barón, Julio Escobar-Potes, Aarón Levi Garavito-Acosta, Franky Juliano Galeano-Ramírez, Eliana Rocío González-Molano, Maria Camila Gomez Cardona, Anderson Grajales, David Camilo López-Valenzuela, Wilmer Martinez-Rivera, Nicolás Martínez-Cortés, Rocío Clara Alexandra Mora-Quiñones, Sara Naranjo-Saldarriaga, Antonio Orozco, Daniel Parra-Amado, Julián Pérez-Amaya, José Pulido, Karen L. Pulido-Mahecha, Carolina Ramírez-Rodríguez, Sergio Restrepo Ángel, José Vicente Romero-Chamorro, Nicol Valeria Rodríguez-Rodríguez, Norberto Rodríguez-Niño, Diego Hernán Rodríguez-Hernández, Carlos D. Rojas-Martínez, Johana Andrea Sanabria-Domínguez, Diego Vásquez-Escobar
Luis Armando Galvis-Aponte, Adriana Isabel Ortega-Arrieta, Adriana Marcela Rivera-Zárate

Do professional exchange-rate forecasters change their projections upon global economic policy uncertainty (EPU) shocks? Significant effects have been identified for major currencies, but emerging-market currencies are usually more difficult to predict and less related to global shocks. We study this question for five Latin-American currencies: Brazil, Chile, Colombia, Mexico, and Peru using data for the period 2003–2020. Our results show that global EPU shocks lead to significant upward revisions implying expected exchange-rate depreciations on a 12-month horizon. Using time-varying coefficients, we find intensified impacts during crisis events such as the great financial crisis, and the initial COVID-19 emergency. These non-linear effects from global EPU shocks are new in the literature. Our results are not only robust to the use of alternative measures of global uncertainty, but are also consistent with the forward-looking nature of economic expectations given the documented negative effects of EPU shocks on global investment and consumption.