Ma ín-Rod íguez, Nini Johana; González-Ruíz, Juan Da id; Bo e o, Se gio
A icle
Dynamic spillo e s o economic policy unce ain y: A TVP-
VAR analysis o La in Ame ican and global EPU indices
Economies
P o ided in Coope a ion wi h:
MDPI – Mul idisciplina y Digi al Publishing Ins i u e, Basel
Sugges ed Ci a ion: Ma ín-Rod íguez, Nini Johana; González-Ruíz, Juan Da id; Bo e o, Se gio (2025) :
Dynamic spillo e s o economic policy unce ain y: A TVP-VAR analysis o La in Ame ican and global
EPU indices, Economies, ISSN 2227-7099, MDPI, Basel, Vol. 13, Iss. 1, pp. 1-28,
h ps://doi.o g/10.3390/economies13010011
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Ci a ion: Ma ín-Rod íguez, N. J.,
González-Ruíz, J. D., & Bo e o, S.
(2025). Dynamic Spillo e s o
Economic Policy Unce ain y: A
TVP-VAR Analysis o La in Ame ican
and Global EPU Indices. Economies,
13(1), 11. h ps://doi.o g/10.3390/
economies13010011
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A icle
Dynamic Spillo e s o Economic Policy Unce ain y: A TVP-VAR
Analysis o La in Ame ican and Global EPU Indices
Nini Johana Ma ín-Rod íguez 1,* , Juan Da id González-Ruíz2and Se gio Bo e o 3
1G upo de In es igación en Ingenie ía Financie a GINIF, P og ama de Ingenie ía Financie a,
Facul ad de Ingenie ías, Uni e sidad de Medellín, Medellin 050026, Colombia
2G upo de In es igación en Finanzas y Sos enibilidad, Depa amen o de Economía, Facul ad de Ciencias
Humanas y Económicas, Uni e sidad Nacional de Colombia—Sede Medellín, Medellin 050034, Colombia;
[email p o ec ed]
3Depa amen o de Ingenie ía de la O ganización, Facul ad de Minas, Uni e sidad Nacional de Colombia,
Sede Medellin, Medellín 050034, Colombia; [email p o ec ed]
*Co espondence: [email p o ec ed]
Abs ac : This s udy examines he dynamic in e connec edness o economic policy unce -
ain y (EPU) among La in Ame ican economies—B azil, Chile, Colombia, and Mexico—and
signi ican in e na ional egions, including he Uni ed S a es, Eu ope, and Japan, as well as
a global EPU index. Using a Time-Va ying Pa ame e Vec o Au o eg essi e (TVP-VAR)
model wi h mon hly da a, his s udy e eals he e ol ing spillo e e ec s and dependen-
cies cap u ing how unce ain y in one ma ke can ansmi ac oss o he s on bo h egional
and global scales. The indings highligh he signi ican impac o ex e nal EPU, pa icu-
la ly om he U.S. and global EPU sou ces on La in Ame ica, posi ioning i as a p ima y
ecipien o in e na ional unce ain y. These esul s unde sco e he need o La in Ame -
ican economies o adop esilience s a egies—such as ade di e si ica ion and egional
coope a ion— o mi iga e ulne abili ies o global shocks. This s udy o e s aluable in-
sigh s in o he mechanisms o economic unce ain y ansmission, guiding policymake s
in de eloping coo dina ed esponses o educe he e ec s o ex e nal ola ili y and os e
egional economic s abili y.
Keywo ds: economic policy unce ain y (EPU); spillo e e ec s; Time-Va ying Pa ame e
Vec o Au o eg essi e (TVP-VAR); La in Ame ican economies; in e na ional economic
in e dependencies
1. In oduc ion
In ecen yea s, he apid ad ance o globaliza ion has s eng hened he connec ions
be ween na ional economies, ins i u ions, and policies wo ldwide. This inc eased in-
eg a ion means ha economic policy changes in one coun y can ha e ipple e ec s
on o he coun ies, e en hose no di ec ly a ec ed by he o iginal policy decisions
(
Nyaku ukwa & See ha am,2023
). Majo global e en s o e he las ew decades, includ-
ing he 2008 Global Financial C isis, he 2018 U.S. ade wa , he COVID-19 pandemic in
2020, and he 2022 Russian–Uk ainian con lic , ha e in ensi ied economic policy unce -
ain y (EPU). Policymake s aced wi h he challenge o s abilizing economies amid such
c ises o en employ un es ed s a egies, he eby in oducing addi ional laye s o unp e-
dic abili y. The impac o EPU spans a ious economic and inancial domains, such as s ock
ma ke s, in e na ional ade, he c yp ocu ency ma ke , indus ial p oduc ion, and em-
ploymen , as epo ed in s udies conduc ed by Abaidoo (2019),
Paule-Vianez e al. (2021),
and Roma e al. (2021).
Economies 2025,13, 11 h ps://doi.o g/10.3390/economies13010011
Economies 2025,13, 11 2 o 28
Theo e ical and empi ical esea ch has examined he channels h ough which EPU
in luences b oade mac oeconomic and inancial a iables. Song e al. (2022) highligh
wo p incipal mechanisms unde lying his ela ionship: he supply–demand ma ke sen-
imen channels. Inc eased unce ain y wi hin he supply–demand channel can dampen
p oduc ion incen i es, leading o inancial ma ke ola ili y and mac oeconomic indica o
ins abili y. Empi ical e idence shows ha EPU can educe in es men (Gulen & Ion,2015;
Bake e al.,2016;Kong e al.,2022), play an inc easingly c ucial ole in d i ing luc ua ions
in oil demand (F. Liu e al.,2024;Degiannakis e al.,2018), a ec s ock ma ke liquidi y
(Paule-Vianez e al.,2020;Mish a e al.,2024;Raza e al.,2023;Xiao e al.,2024), and
heigh en exchange a e ola ili y (Huang e al.,2024;Chen e al.,2020;Bush & No ia,2021;
Rúa & Ma ín-Rod íguez,2024). Such ola ili y o en causes sho - e m shi s in commodi y
demand, dis up ing he balance o supply and demand o e he long e m and igge ing
b oade economic imbalances.
These spillo e e ec s and hei u he explana ion h ough global eedback loops
ha e a ac ed subs an ial schola ly in e es as esea che s s i e o unde s and he mul-
iplie e ec s o EPU on economic pe o mance. No ably, An onakakis e al. (2018),
Zhou e al. (2022),
K.-H. Wang e al. (2023), and Kayani e al. (2024) ha e demons a ed
ha domes ic unce ain y is shaped by bo h in e nal and ex e nal unce ain y spillo e s,
unde sco ing he impo ance o dis inguishing be ween a coun y o egion’s in e nal and
ex e nal policy unce ain y ansmission p ocesses. By cap u ing bo h di ec and indi ec
e ec s, i becomes possible o assess he b oad impac s o unce ain y shocks, which a e
o en p olonged by in e na ional spillo e s. This emphasizes he need o policymake s o
es ablish “ea ly-wa ning sys ems” (Diebold & Yilmaz,2012) ha enable hem o mi iga e
po en ial ad e se e ec s by adjus ing policy ins umen s. Mo eo e , iden i ying which
o ms o unce ain y exe he mos in luence is c ucial, as some ypes may ha e mo e
subs an ial economic implica ions han o he s (Mum az & Su ico,2018).
Mos s udies ha e adi ionally ocused on coun y-le el unce ain y p opaga ion mech-
anisms. Howe e , ecen ad ancemen s, such as he wo k by
Gabaue and Gup a (2018)
,
ha e in oduced a mo e g anula pe spec i e by analyzing ca ego ical economic policy
unce ain y spillo e s be ween na ions, pa icula ly be ween he U.S. and Japan, ac oss
ca ego ies like mone a y, iscal, ade, and cu ency policy unce ain ies. This app oach
o e s insigh s in o bo h in e nal and ex e nal ansmission mechanisms, e ealing he am-
pli ica ion e ec s o in e na ional eedback and he pe sis ence o unce ain y shocks wi hin
in e connec ed economies. The a ailabili y o de ailed EPU indices, including hose o
G eece (Ha dou elis e al.,2018), acili a es a deepe examina ion o unce ain y dynamics
ac oss speci ic egions.
Zhou e al. (2022) also analyzed EPU spillo e s ac oss 19 de eloped and eme ging
economies, including some La in Ame ican coun ies, inding signi ican c oss-bo de
e ec s ha in ensi ied du ing majo e en s like COVID-19. Thei s udy mapped EPU
ansmission pa hs and highligh ed inc eased spillo e impac s om pandemic- ela ed
es ic ions; howe e , i did no explo e he speci ic e ec s on La in Ame ica. Fu he mo e,
while he s udy p o ided aluable insigh s in o EPU spillo e dynamics, i lacked a dis inc-
ion be ween in e nal ( egional) and ex e nal (global and majo economies) spillo e s.
Building on his ounda ion, he p esen s udy add esses his gap by examining he
complex and in e connec ed na u e o economic policy unce ain y (EPU) ac oss global and
La in Ame ican economies using a Time-Va ying Pa ame e Vec o Au o eg ession (TVP-
VAR) model. This app oach p o ides essen ial insigh s o policymake s and in es o s,
o e ing a amewo k o an icipa e he a ied impac s o EPU on eme ging ma ke s. Wi h a
ocus on La in Ame ica’s ulne abili y and esilience o global economic luc ua ions, his
Economies 2025,13, 11 3 o 28
s udy suppo s he de elopmen o mo e e ec i e policy esponses, ul ima ely p omo ing
economic s abili y in he egion.
The p ima y objec i e o his s udy is o in es iga e he in e connec ed dynamics o
economic policy unce ain y (EPU) ac oss global and La in Ame ican economies, u ilizing
a Time-Va ying Pa ame e Vec o Au o eg essi e (TVP-VAR) model. To achie e his, his
s udy o mula es and add esses he ollowing esea ch hypo heses (RHs), each aimed a
deepening ou unde s anding o EPU spillo e e ec s and hei implica ions:
•
RH1: ex e nal EPU signi ican ly in luences La in Ame ican economies mo e han in e -
nal EPU, making hese economies p ima ily ecipien s o global
unce ain y spillo e s.
This hypo hesis s ems om p io s udies, such as An onakakis e al. (2018) and
Zhou e al. (2022), which highligh he dominan ole o ex e nal EPU in shaping domes ic
unce ain y in in e connec ed ma ke s, pa icula ly in eme ging economies.
•
RH2: wi hin La in Ame ica, economies like B azil and Mexico ac as egional EPU
ansmi e s, bu hei ole is seconda y o hei dependence on global
economic in e ac ions.
This hypo hesis d aws on Zhou e al. (2022) and Kayani e al. (2024), examining how
B azil and Mexico simul aneously se e as ecei e s o ex e nal EPU and limi ed egional
ansmi e s wi hin La in Ame ica.
•
RH3: he in ensi y o ex e nal EPU impac s a ies ac oss La in Ame ican economies,
in luenced by hei deg ee o economic in eg a ion wi h global ma ke s.
Inspi ed by K.-H. Wang e al. (2023), his hypo hesis examines how economic linkages,
such as Mexico’s close ies o he U.S., shape he he e ogenei y o EPU spillo e e ec s
wi hin he egion.
•
RH4: s eng hened ins i u ional amewo ks can educe La in Ame ica’s ulne abili y
o ex e nal EPU, highligh ing he ole o go e nance and policy s abili y.
This hypo hesis emphasizes he insigh s o K.-H. Wang e al. (2023), ega ding he
impo ance o ins i u ional quali y in mi iga ing ad e se e ec s om
ex e nal unce ain ies.
•
RH5: egional coope a ion h ough amewo ks such as he Paci ic Alliance and
Me cosu can alle ia e sha ed EPU isks, os e ing economic s abili y in La in Ame ica.
Re lec ing on s udies like Gabaue and Gup a (2018), his hypo hesis in es i-
ga es how collabo a i e economic policies can educe sys emic spillo e impac s in
in e connec ed ma ke s.
By analyzing he in e connec edness be ween egional and global EPU indices, his
s udy cap u es he in luence o ex e nal unce ain ies on La in Ame ican coun ies, which
sha e common mac oeconomic s uc u es and exposu e o in e na ional economic o ces.
This app oach p o ides a amewo k o assessing c oss- egional spillo e e ec s and
po en ial sys emic impac s. By add essing hese hypo heses, his s udy aims o o e ac-
ionable insigh s o policymake s, inancial egula o s, and in es o s, acili a ing mo e
e ec i e s a egies o mi iga e he impac s o economic policy unce ain y in La in Ame ica.
The hypo heses a e sys ema ically explo ed in he Sec ions 5and 6, ensu ing a clea linkage
be ween indings and his s udy’s objec i es and p o iding aluable insigh s in o he mech-
anisms o unce ain y ansmission and i s implica ions o global
mac oeconomic s abili y.
The s uc u e o his s udy is as ollows: Sec ion 2p o ides a li e a u e e iew, o e ing
an o e iew o key li e a u e clus e s on economic policy unce ain y and a his o iog aphic
analysis o EPU and TVP-VAR esea ch, ocusing on hei ounda ions, e olu ion, and
eme ging ends. Sec ion 3desc ibes he empi ical da a and me hodology, de ailing he
da ase and he TVP-VAR model. Sec ion 4p esen s empi ical indings, ocusing on
Economies 2025,13, 11 4 o 28
he gene al, in e nal, and ex e nal connec edness esul s, while Sec ion 5discusses he
implica ions o hese indings. Finally, Sec ion 6concludes his s udy wi h inal ema ks.
2. Li e a u e Re iew
2.1. Li e a u e Clus e s
Figu e 1p esen s he in e connec edness and ela ionships be ween p ominen e-
sea ch e ms associa ed wi h EPU indices and TVP-VAR me hodologies. Using VOS iewe
so wa e e sion 1.6.20 ( an Eck & Wal man,2017) o map da a om Scopus and Web o
Science, he ne wo k illus a es clus e s o keywo ds ela ed o a ious hemes, such as
spillo e s, ola ili y, geopoli ical isks, and he in luence o economic policy unce ain y
ac oss global con ex s. This ne wo k se es as a ounda ion o analyzing he dynamic
connec edness and spillo e e ec s o EPU indices using a TVP-VAR app oach, a ocal
poin o his s udy. The analysis e eals ou p ima y clus e s: ed, g een, blue, and yellow,
which will be examined in de ail below.
Economies 2025, 13, x FOR PEER REVIEW 4 o 29
da ase and he TVP-VAR model. Sec ion 4 p esen s empi ical indings, ocusing on he gen-
e al, in e nal, and ex e nal connec edness esul s, while Sec ion 5 discusses he implica ions
o hese indings. Finally, Sec ion 6 concludes his s udy wi h inal ema ks.
2. Li e a u e Re iew
2.1. Li e a u e Clus e s
Figu e 1 p esen s he in e connec edness and ela ionships be ween p ominen e-
sea ch e ms associa ed wi h EPU indices and TVP-VAR me hodologies. Using
VOS iewe so wa e e sion 1.6.20 ( an Eck & Wal man, 2017) o map da a om Scopus
and Web o Science, he ne wo k illus a es clus e s o keywo ds ela ed o a ious
hemes, such as spillo e s, ola ili y, geopoli ical isks, and he in luence o economic pol-
icy unce ain y ac oss global con ex s. This ne wo k se es as a ounda ion o analyzing
he dynamic connec edness and spillo e effec s o EPU indices using a TVP-VAR ap-
p oach, a ocal poin o his s udy. The analysis e eals ou p ima y clus e s: ed, g een,
blue, and yellow, which will be examined in de ail below.
Figu e 1. Co-occu ence ne wo k o keywo ds om he sea ch e ms EPU OR “Economic Policy
Unce ain y” AND TVP-VAR. Sou ce: au ho s’ analysis using VOS iewe wi h da a om Scopus
and Web o Science.
2.1.1. Clus e 1 (Red): D i e s and T ansmission Channels o Global EPU
Clus e 1 cen e s on he dynamic and in e connec ed na u e o EPU indices and i s
spillo e e ec s ac oss bo h La in Ame ican and global economies, ocusing on how policy-
ela ed unce ain ies, pa icula ly hose linked o mone a y and economic policies, in luence
inancial s abili y and decision making on an in e na ional scale. This s udy employs a TVP-
VAR model o cap u e he e ol ing na u e o hese spillo e s, wi h he ex ended amewo k
by An onakakis e al. (2020) p o iding insigh s in o c oss-coun y EPU ansmission, as
demons a ed in s udies o US–Japan and US–China economic in e ac ions (Gabaue &
Gup a, 2018; Jiang e al., 2019).
Keywo ds such as ade, in es men , exchange a es, and s ock ma ke s emphasize he
economic dimensions mos a ec ed by EPU, wi h s udies indica ing ha hese a eas a e
Figu e 1. Co-occu ence ne wo k o keywo ds om he sea ch e ms EPU OR “Economic Policy
Unce ain y” AND TVP-VAR. Sou ce: au ho s’ analysis using VOS iewe wi h da a om Scopus and
Web o Science.
2.1.1. Clus e 1 (Red): D i e s and T ansmission Channels o Global EPU
Clus e 1 cen e s on he dynamic and in e connec ed na u e o EPU indices and
i s spillo e e ec s ac oss bo h La in Ame ican and global economies, ocusing on how
policy- ela ed unce ain ies, pa icula ly hose linked o mone a y and economic policies,
in luence inancial s abili y and decision making on an in e na ional scale. This s udy
employs a TVP-VAR model o cap u e he e ol ing na u e o hese spillo e s, wi h he
ex ended amewo k by An onakakis e al. (2020) p o iding insigh s in o c oss-coun y EPU
ansmission, as demons a ed in s udies o US–Japan and US–China economic in e ac ions
(Gabaue & Gup a,2018;Jiang e al.,2019).
Keywo ds such as ade, in es men , exchange a es, and s ock ma ke s emphasize
he economic dimensions mos a ec ed by EPU, wi h s udies indica ing ha hese a eas a e
pa icula ly sensi i e o policy-induced shocks. Fo ins ance, ade ensions and exchange
a e luc ua ions be ween majo economies impac unce ain y ansmission, unde sco ing
Economies 2025,13, 11 5 o 28
he need o coo dina ed esponses o mi iga e ad e se e ec s (An onakakis e al.,2019).
Addi ionally, mac op uden ial policies a e sugges ed as a s abilizing measu e, especially in
ma ke s like eal es a e and inance, which a e signi ican ly impac ed by mac oeconomic
unce ain ies wi hin he Uni ed S a es (Gabaue & Gup a,2020).
Speci ic economic shocks, such as hose om oil and gold ma ke s, u he unde sco e
he complex pa hways h ough which EPU a ec s ma ke ola ili y. S udies highligh ha
oil supply shocks p edominan ly d i e ola ili y spillo e s o he gold ma ke , in luencing
hedging s a egies and demons a ing he in e connec edness o commodi y and inancial
ma ke s unde condi ions o heigh ened unce ain y (Mokni e al.,2020). Geopoli ical isk
and global heal h c ises, no ably he COVID-19 pandemic, ha e also in ensi ied he ans-
mission o EPU ac oss egions, wi h signi ican impac s on in e na ional ade, in es men ,
and s ock ma ke s abili y (Yousse e al.,2021).
This clus e unde sco es he need o coo dina ed policy esponses o manage he
cascading e ec s o EPU shocks ac oss in e connec ed economies and he ele ance o
unde s anding EPU mechanisms in s abilizing global economic and inancial sys ems.
The analysis highligh s he ole o in e na ional collabo a ion in add essing ola ili y and
implemen ing obus economic s abili y measu es, in o med by empi ical insigh s in o
EPU’s impac on inancial and commodi y ma ke s. Impo an ly, his clus e also e eals
ha while s udies ha e explo ed global dynamics ex ensi ely, he La in Ame ican con ex
emains unde explo ed, highligh ing a c i ical gap ha his s udy aims o add ess.
2.1.2. Clus e 2 (G een): Financial Ma ke Reac ions and Risk Managemen Unde EPU
Clus e 2 ocuses on c i ical inancial concep s and ma ke esponses o EPU indices
ac oss global and La in Ame ican ma ke s. Cen al hemes include ola ili y, spillo e s, isk,
and e u ns, highligh ing how EPU-induced unce ain y in ensi ies ma ke in e connec -
edness and in luences in es men ou comes in bo h de eloped and eme ging economies
(Gabaue & Gup a,2018;Jiang e al.,2019;An onakakis e al.,2019).
Keywo ds like “in es o sen imen ”, “hedge”, and “gold” e lec ypical in es o
beha io s amid unce ain y. In es o sen imen deno es he collec i e ou look o ma -
ke pa icipan s, which can d i e ei he inc eased ola ili y o s abili y based on eco-
nomic signals. Sa e-ha en asse s such as gold and hedging s a egies se e as p o ec i e
measu es agains ma ke luc ua ions and a e p e alen isk managemen esponses o
EPU (
Mokni e al.,2020
;Yousse e al.,2021). The li e a u e on sa e-ha en asse s unde -
sco es how economic unce ain y d i es beha io al shi s among in es o s seeking s abili y
h ough adi ional asse s (Gabaue & Gup a,2020).
Mo eo e , e ms like “oil p ice”, “s ock”, and “ma ke s” poin o speci ic asse s sensi-
i e o policy changes, whe e o ecas ing and p icing models a e essen ial o managing
he isk ha hese luc ua ions en ail. S udies explo ing EPU’s impac on asse s such as
oil and s ocks e eal ha EPU ampli ies ola ili y and a ec s p edic abili y, necessi a ing
obus isk managemen and o ecas ing models o na iga e unce ain y in ma ke e u ns
(Ch is ou e al.,2020;Apos olakis e al.,2021). This clus e emphasizes he in e connec ed
na u e o inancial ma ke s unde EPU and he alue o hedging and p edic i e s a egies
in managing isk and main aining ma ke s abili y. Despi e his ex ensi e body o li e a u e,
he e is limi ed ocus on La in Ame ica’s inancial ma ke s and hei unique ulne abili ies
o EPU-induced spillo e s, a gap ha his s udy add esses by examining hese dynamics
wi hin he egion.
2.1.3. Clus e 3 (Blue): Me hodologies and T ansmission Mechanisms o EPU Spillo e s
Clus e 3 ocuses on essen ial me hodological and analy ical ools o examining
he spillo e s and ansmission mechanisms o EPU indices ac oss egions. Key e ms,
Economies 2025,13, 11 6 o 28
including causali y, de e minan s, dynamic connec edness, and ansmission, s ongly
emphasize iden i ying he d i e s and causal pa hways linking EPU ac oss economies.
The clus e highligh s econome ic echniques like impulse esponse analysis and uni
oo es s, which cap u e he impac o shocks om one ma ke on o he s o e ime,
especially unde condi ions o mac oeconomic ola ili y. These me hods a e c ucial in
disen angling complex causal ela ionships and e ealing how unce ain y p opaga es
ac oss in e connec ed ma ke s.
Fo example, esea ch on he U.S. and China highligh s he ole o bila e al ade
and exchange a e policies in a ec ing c oss-coun y spillo e s (Jiang e al.,2019). S udies
ocused on G eek and Eu opean ma ke s also unde sco e how in e nal and ex e nal EPU
shocks impac iscal and mone a y policies o e ime (An onakakis e al.,2019).
Thus, he U.S. plays a pa icula ly signi ican ole in his dynamic, as i s mac oeco-
nomic condi ions s ongly in luence global and La in Ame ican economies, o en gene a ing
b oad- eaching spillo e e ec s. This unde sco es he need o dynamic connec edness
me hods like TVP-VAR, which p o ide insigh s in o he in ica e causal pa hways h ough
which unce ain y sp eads. The inclusion o hese econome ic ools, along wi h he ocus
on mac oeconomic ola ili y and e icien es ing, e lec s his s udy’s aim o unde s and
how policy shocks in majo economies can igge ipple e ec s ac oss eme ging ma ke s,
ca ying implica ions o in es o s and policymake s alike. Howe e , he applica ion o
hese me hodologies o La in Ame ican economies emains sca ce in he li e a u e, and his
s udy con ibu es o illing his gap by p o iding egion-speci ic insigh s.
2.1.4. Clus e 4 (Yellow): Nonlinea Dynamics and Speci ic Shocks in EPU
Clus e 4, which includes nonlinea causali y and oil p ice shocks, unde sco es he
impo ance o explo ing speci ic ypes o shocks and hei nonlinea e ec s on economic
policy unce ain y (Mokni e al.,2020;Elshe i ,2024). Nonlinea causali y highligh s he
complex ela ionships be ween a iables, acknowledging ha economic sys ems o en
exhibi nonlinea esponses o sudden o ex eme shocks. This complexi y is especially
ele an o e en s like oil p ice shocks, which can cause disp opo iona e and unp e-
dic able impac s ac oss bo h ene gy and b oade inancial ma ke s, po en ially des abilizing
economic s abili y.
S udies conduc ed by Z. Liu e al. (2023) e eal ha oil p ice shocks, whe he om
supply, demand, o isk ac o s, impac a ious ma ke s in asymme ic and nonlinea
ways, in ensi ying economic policy unce ain y and sp eading ola ili y ac oss inancial
sys ems (Mokni e al.,2020). These indings highligh he c i ical need o policy amewo ks
conside ing nonlinea dynamics, as shocks in one a ea can p opaga e unp edic ably h ough
in e connec ed economic and inancial ne wo ks, unde sco ing he necessi y o obus ,
adap i e esponse mechanisms. Despi e hese insigh s, exis ing s udies do no adequa ely
add ess nonlinea dynamics wi hin he La in Ame ican con ex , which is a signi ican gap
his s udy seeks o ill by examining speci ic shocks and hei implica ions o his egion.
In conclusion, he cu en body o li e a u e e eals a gap in unde s anding he in-
ica e and e ol ing ela ionships among economic policy unce ain ies, speci ically due
o he absence o s udies ocused on he La in Ame ican con ex . This lack o esea ch
lea es c i ical ques ions unanswe ed abou how economic policy unce ain ies p opaga e
wi hin and ac oss La in Ame ican economies and hei in e ac ions wi h global indices.
This p oposed s udy aims o add ess hese gaps by applying ad anced dynamic modeling
o quan i y he spillo e e ec s o economic policy unce ain y, a necessa y s ep o p o ide
obus e idence on he egion’s ulne abili y and i s eliance on ex e nal shocks. Unde -
s anding hese ela ionships is c ucial o iden i ying po en ial a eas o economic agili y
and esilience. Addi ionally, he empi ical insigh s gene a ed will o e policymake s es-
Economies 2025,13, 11 7 o 28
sen ial guidance in o mula ing esilien , p oac i e s a egies o mi iga e he des abilizing
e ec s o economic policy unce ain y, ul ima ely con ibu ing o be e -in o med decision
making ha suppo s economic s abili y and de elopmen in La in Ame ica.
2.2. His o iog aphic Analysis o EPU and TVP-VAR Resea ch: Founda ions, E olu ion, and
Eme ging T ends
As Ga ield (2004) desc ibed, he his o iog aphic map isually ep esen s a ch onolog-
ical ne wo k o key ci a ions wi hin a bibliog aphic collec ion, cons uc ing a ma ix ha
aces he his o ical connec ions be ween ounda ional wo ks. This app oach p o ides in-
sigh s in o empo al pa e ns and schola ly impac , as A ia and Cuccu ullo (2017) ou lined.
Acco ding o Ma ín-Rod íguez e al. (2023) and Vogel e al. (2021), such maps e eal he
p og ession o co e s udies, showing he ansmission o ideas ac oss esea ch.
Figu e 2illus a es a single cohesi e clus e , indica ing a concen a ed lineage o in-
luence wi hin he ield. Thus, his p esen s a his o iog aph o he academic de elopmen
o EPU and Time-Va ying Pa ame e Vec o Au o eg essi e (TVP-VAR) esea ch, wi h
ou clus e s di e en ia ed by colo ( ed, blue, pu ple, and g een) o indica e hema ic
o me hodological g oupings. Then, each colo ep esen s a dis inc sub ield, such as
ounda ional wo ks ( ed), egional applica ions (blue), sec o -speci ic s udies (pu ple),
and eme ging hemes (g een). This isualiza ion cap u es he e olu ion and di e si i-
ca ion o esea ch, highligh ing ounda ional s udies and hei subsequen in luence on
speci ic sub ields. The leading s udies a e cen e ed a ound key in luen ial s udies, no ably
Gabaue and Gup a (2018
) in ed, which ac s as a c i ical node o he en i e ne wo k. This
s udy explo es in e nal and ex e nal EPU spillo e s be ween he U.S. and Japan, pionee -
ing he disagg ega ion o mone a y, iscal, cu ency, and ade policy unce ain ies. Also,
his highligh ed he Fukushima Daiichi acciden as a subs an ial nega i e ade shock,
demons a ing how disc e e e en s can p opaga e in e na ional spillo e s, pa icula ly in
mone a y policy.
Economies 2025, 13, x FOR PEER REVIEW 7 o 29
ela ionships is c ucial o iden i ying po en ial a eas o economic agili y and esilience.
Addi ionally, he empi ical insigh s gene a ed will o e policymake s essen ial guidance in
o mula ing esilien , p oac i e s a egies o mi iga e he des abilizing e ec s o economic
policy unce ain y, ul ima ely con ibu ing o be e -in o med decision making ha sup-
po s economic s abili y and de elopmen in La in Ame ica.
2.2. His o iog aphic Analysis o EPU and TVP-VAR Resea ch: Founda ions, E olu ion, and
Eme ging T ends
As Ga ield (2004) desc ibed, he his o iog aphic map isually ep esen s a ch onolog-
ical ne wo k o key ci a ions wi hin a bibliog aphic collec ion, cons uc ing a ma ix ha
aces he his o ical connec ions be ween ounda ional wo ks. This app oach p o ides in-
sigh s in o empo al pa e ns and schola ly impac , as A ia and Cuccu ullo (2017) ou lined.
Acco ding o Ma ín-Rod íguez e al. (2023) and Vogel e al. (2021), such maps e eal he
p og ession o co e s udies, showing he ansmission o ideas ac oss esea ch.
Figu e 2 illus a es a single cohesi e clus e , indica ing a concen a ed lineage o in lu-
ence wi hin he ield. Thus, his p esen s a his o iog aph o he academic de elopmen o
EPU and Time-Va ying Pa ame e Vec o Au o eg essi e (TVP-VAR) esea ch, wi h ou
clus e s di e en ia ed by colo ( ed, blue, pu ple, and g een) o indica e hema ic o me h-
odological g oupings. Then, each colo ep esen s a dis inc sub ield, such as ounda ional
wo ks ( ed), egional applica ions (blue), sec o -speci ic s udies (pu ple), and eme ging
hemes (g een). This isualiza ion cap u es he e olu ion and di e si ica ion o esea ch,
highligh ing ounda ional s udies and hei subsequen in luence on speci ic sub ields. The
leading s udies a e cen e ed a ound key in luen ial s udies, no ably Gabaue and Gup a
(2018) in ed, which ac s as a c i ical node o he en i e ne wo k. This s udy explo es in e nal
and ex e nal EPU spillo e s be ween he U.S. and Japan, pionee ing he disagg ega ion o
mone a y, iscal, cu ency, and ade policy unce ain ies. Also, his highligh ed he Fuku-
shima Daiichi acciden as a subs an ial nega i e ade shock, demons a ing how disc e e
e en s can p opaga e in e na ional spillo e s, pa icula ly in mone a y policy.
Figu e 2. His o iog aphic map. Sou ce: au ho s’ own esea ch using he Bibliome ix ool (A ia &
Cuccu ullo, 2017), as well as Scopus and WoS da abases.
Figu e 2. His o iog aphic map. Sou ce: au ho s’ own esea ch using he Bibliome ix ool
(A ia & Cuccu ullo,2017), as well as Scopus and WoS da abases.
In his way, he ed clus e ex ends o se e al s udies be ween 2019 and 2024, such as
Apos olakis e al. (2021), Mokni e al. (2020), and Yousse e al. (2021), and ep esen s s udies
u ilizing TVP-VAR and ela ed me hodologies o analyze EPU spillo e s in inancial and
Economies 2025,13, 11 8 o 28
commodi y ma ke s. Signi ican connec ions sugges ha his me hodological amewo k
has become a s anda d app oach wi hin he ield, wi h subsequen esea ch building on
i o examine speci ic inancial a iables, mac oeconomic indica o s, and spillo e e ec s.
Addi ionally, s udies conduc ed by Zou e al. (2024) and Ren e al. (2024) ep esen he mos
ecen esea ch. These s udies a e likely applying o ex ending he TVP-VAR me hodology
o analyze EPU impac s in e en newe o mo e complex domains, possibly in luenced
by global e en s like he COVID-19 pandemic. The high connec i i y among hese nodes
sugges s ha ecen e en s ha e spu ed a su ge in esea ch ocusing on EPU spillo e s in
esponse o con empo a y global challenges, leading o esh insigh s wi hin he ield.
This ne wo k’s b anching indica es bo h a buildup o exis ing me hodologies and an
explo a ion in o new applica ions o geog aphic con ex s o e ime. Each colo in he his o i-
og aph co esponds o a dis inc hema ic o me hodological g ouping, allowing o a isual
unde s anding o he di e se esea ch ajec o ies wi hin EPU and TVP-VAR li e a u e.
On he o he hand, he blue clus e is posi ioned mainly in he uppe sec ion. This
includes s udies such as Degiannakis e al. (2018), E.-Z. Wang and Lee (2020), and
Y. Wang e al. (2022
). This g ouping ocused esea ch on egional o coun y-speci ic appli-
ca ions o EPU, examining how policy unce ain y a ec s localized economies o speci ic
ma ke s (e.g., China o o he Asian ma ke s). The pe iphe al placemen o his clus e ,
s ill connec ed o he cen al ed clus e , sugges s ha hese s udies a e in luenced by
Gabaue and Gup a (2018) ounda ional me hodologies bu apply hem in geog aphically
dis inc con ex s.
The pu ple clus e , which includes s udies conduc ed by Assa e al. (2021) and
Ch is ou e al. (2020), sugges s an o ien a ion owa d speci ic sec o s o nuanced a eas o
inance, po en ially examining he impac o EPU on non- adi ional ma ke s o al e na i e
asse s. This g oup may ocus on opics such as eal es a e, ou ism, o niche in es men
ehicles ha expe ience unique impac s om policy unce ain y. The placemen o he
pu ple nodes implies ha his line o inqui y is mo e specialized and has e ol ed somewha
independen ly om he cen al, inance- ocused esea ch.
Finally, he g een clus e , ep esen ed by s udies conduc ed by L. Liu e al. (2020),
seems smalle and less in e connec ed wi h he main ne wo k, po en ially indica ing newe
o less mains eam applica ions o EPU analysis. This could include eme ging a eas such as
en i onmen al inance, g een bonds, o sus ainabili y-linked inancial ins umen s, whe e
he ield is beginning o es ablish connec ions wi h EPU esea ch. The ela i ely isola ed
placemen sugges s ha his a ea is s ill de eloping wi hin he b oade EPU amewo k.
This his o iog aphic map p o ides a well-o ganized ep esen a ion o he p og ession
o EPU esea ch, wi h each colo -coded clus e cap u ing a unique sub ield o me hodolog-
ical app oach. The ed clus e deno es he ounda ional and widely adop ed TVP-VAR
me hodology, in luencing a b oad ange o applica ions in inance and economics. Fu he -
mo e, i illus a es he ield’s cu en ocus on con empo a y challenges. The blue, pu ple,
and g een clus e s ep esen ex ensions o his wo k in o egional, sec o al, and eme ging
a eas. This s uc u e e lec s a dynamic esea ch a ea ha , while oo ed in ounda ional
me hodologies, con inues o b anch in o new and e ol ing opics.
Finally, he his o iog aphic mapping o EPU and TVP-VAR esea ch highligh s a
well-documen ed e olu ion wi hin he ield, ye i also e eals a no able esea ch gap
conce ning EPU spillo e s speci ic o La in Ame ica. While ounda ional s udies ha e
explo ed EPU’s c oss-na ional impac s, pa icula ly be ween majo economies like he U.S.
and Japan, he ocus has emained mainly on de eloped na ions o singula economic
e en s. As a esul , he unique dynamics o EPU wi hin La in Ame ican economies—and
hei in e ac ions wi h global unce ain ies— emain insu icien ly examined. This gap
unde sco es he need o a dedica ed analysis o how EPU spillo e s in luence global
Economies 2025,13, 11 15 o 28
This amewo k hus p o ides a comp ehensi e iew o how economic shocks in one a i-
able p opaga e ac oss o he s, highligh ing he dynamics o economic unce ain y spillo e s.
This s udy examines he dynamic in e connec edness o EPU index e u ns ac oss
key La in Ame ican economies—B azil, Chile, Colombia, and Mexico—as well as majo
in e na ional egions, including he Uni ed S a es, Eu ope, Japan, and a global EPU index.
This s udy applies a TVP-VAR model using mon hly da a o cap u e he e ol ing spillo e
e ec s and dependencies among hese egions. This model is pa icula ly sui ed o analyz-
ing how economic unce ain y in one ma ke can sp ead o o he s ac oss bo h egional and
global scales.
4. Empi ical Resul s
4.1. Gene al Connec edness Findings
Table 3and Figu e 5illus a e he in e connec edness be ween EPU index e u ns
ac oss a ious egions, including B azil, Chile, Colombia, Mexico, a global EPU index
(RGEPU), he Uni ed S a es, Eu ope, and Japan. This able shows bo h he in luence o each
egion’s EPU on o he s (as pe cen ages in he “TO” ow) and he in luence ecei ed om
o he s (in he “FROM” column).
Table 3. Analysis o c oss- egional spillo e e ec s and ne ansmissions in EPU index e u ns.
REPU_BRA REPU_CHI REPU_COL REPU_MEX
RGEPU
REPU_USA REPU_EUR REPU_JPY
FROM
REPU_BRA
80.47 0.00 0.00 0.00 0.00 3.54 0.85 1.64 6.03
REPU_CHI
0.00 61.31 4.51 2.30 10.81 5.48 6.18 6.43 35.72
REPU_COL
0.00 3.36 51.37 10.17 9.87 12.39 7.29 4.64 47.72
REPU_MEX
0.00 2.97 11.78 60.59 4.74 7.39 4.02 5.96 36.86
RGEPU 0.00 6.10 7.38 3.26 33.84 19.85 17.13 10.40 64.11
REPU_USA
1.38 3.45 10.54 3.52 25.21 40.64 10.21 5.05 59.36
REPU_EUR
0.41 4.49 6.48 3.16 22.41 10.22 43.35 9.49 56.65
REPU_JPY
0.92 7.48 5.55 7.23 12.10 5.67 8.13 52.93 47.07
TO 2.71 27.84 46.24 29.63 85.15 64.54 53.81 43.60 353.51
Inc.Own 83.17 89.15 97.61 90.22 118.98 105.18 97.15 96.54 cTCI/TCI
NET −3.32 −7.87 −1.48 −7.23 21.03 5.18 −2.85 −3.46
50.50/44.19
NPT 0.00 2.00 3.00 1.00 6.00 6.00 4.00 2.00
Sou ce: au ho s’ own esea ch.
Each egion has a subs an ial sha e o i s own unce ain y (indica ed along he diago-
nal), such as B azil, wi h 80.47%, o Japan, wi h 52.93%. Howe e , some egions, no ably
he global EPU and he Uni ed S a es, ha e s ong spillo e e ec s, impac ing and being
impac ed by mul iple o he egions. Fo example, he global EPU index con ibu es signi i-
can ly o o he egions (85.15% in he “TO” ow) while also ecei ing in luences om hem
(64.11% in he “FROM” column), indica ing a high deg ee o in e connec edness.
The “NET” ow p o ides insigh s in o whe he each egion is a ne ansmi e o
ecei e o unce ain y. The posi i e ne alues o RGEPU and he USA indica e ha hese
egions a e ne ansmi e s o unce ain y, while he nega i e alues o egions like Chile
and Mexico show hey a e ne ecei e s.
Figu e 5illus a es he di ec ional spillo e s o EPU index e u ns among global and
La in Ame ican economies, highligh ing he in ica e in e connec ions. The a ows in he
igu e indica e he di ec ion o in luence, while hei hickness ep esen s he s eng h o
hese ela ionships. The global EPU (RGEPU) and he Uni ed S a es EPU (REPU_USA)
eme ge as cen al nodes wi h hick, mul idi ec ional a ows, unde sco ing hei oles as
signi ican ansmi e s o EPU o o he egions, pa icula ly La in Ame ica. This con i ms
he indings whe e RGEPU and REPU_USA a e ne ansmi e s o unce ain y.
Economies 2025,13, 11 16 o 28
Economies 2025, 13, x FOR PEER REVIEW 16 o 29
Figu e 5 illus a es he di ec ional spillo e s o EPU index e u ns among global and
La in Ame ican economies, highligh ing he in ica e in e connec ions. The a ows in he
igu e indica e he di ec ion o in luence, while hei hickness ep esen s he s eng h o
hese ela ionships. The global EPU (RGEPU) and he Uni ed S a es EPU (REPU_USA)
eme ge as cen al nodes wi h hick, mul idi ec ional a ows, unde sco ing hei oles as
signi ican ansmi e s o EPU o o he egions, pa icula ly La in Ame ica. This con i ms
he indings whe e RGEPU and REPU_USA a e ne ansmi e s o unce ain y.
Figu e 5. Ne wo k o EPU e u n spillo e s among global and La in Ame ican economies. Sou ce:
au ho s’ own esea ch.
La in Ame ican economies—B azil, Mexico, Chile, and Colombia—a e shown as p i-
ma y ecipien s o EPU index e u n spillo e s, wi h ela i ely hinne a ows connec ing
hem o o he egions. This pa e n indica es ha La in Ame ican coun ies a e mo e ul-
ne able o ex e nal unce ain ies han hey a e in luen ial as ansmi e s o hei own EPU.
The in luence o he U.S. and global EPU on hese economies is subs an ial, emphasizing
La in Ame ica’s dependency on ex e nal economic condi ions. In e - egional spillo e s
wi hin La in Ame ica appea weake , sugges ing a limi ed capaci y o hese economies
o impac each o he ’s s abili y.
The indings unde sco e an asymme ical spillo e s uc u e, whe e global and U.S.-
based unce ain ies signi ican ly in luence La in Ame ica while he e e se impac e-
mains minimal. This in e connec edness highligh s he need o La in Ame ican policy-
make s o de elop esilience s a egies o mi iga e he egion’s suscep ibili y o ex e nal
shocks, pa icula ly om dominan global economies. Regional coope a ion could play a
key ole in bols e ing economic s abili y in he ace o ongoing global unce ain ies.
4.2. In e nal and Ex e nal Connec edness Findings
The in e nal connec edness calcula ions we e conduc ed by g ouping EPU index e-
u ns ac oss key La in Ame ican economies—B azil, Chile, Colombia, and Mexico. These
egional indices we e analyzed in isola ion o assess hei in e nal spillo e s and in e de-
pendencies. In con as , he ex e nal connec edness calcula ions included a b oade se o
in e na ional egions, comp ising he Uni ed S a es, Eu ope, Japan, and a global EPU in-
dex. This di ision allowed o a ocused analysis o spillo e s wi hin La in Ame ica (in-
e nal) e sus hose in luenced by ex e nal global ac o s, p o iding a comp ehensi e iew
o bo h in a- egional and c oss- egional economic policy unce ain y dynamics.
Figu e 5. Ne wo k o EPU e u n spillo e s among global and La in Ame ican economies. Sou ce:
au ho s’ own esea ch.
La in Ame ican economies—B azil, Mexico, Chile, and Colombia—a e shown as p i-
ma y ecipien s o EPU index e u n spillo e s, wi h ela i ely hinne a ows connec ing
hem o o he egions. This pa e n indica es ha La in Ame ican coun ies a e mo e ul-
ne able o ex e nal unce ain ies han hey a e in luen ial as ansmi e s o hei own EPU.
The in luence o he U.S. and global EPU on hese economies is subs an ial, emphasizing
La in Ame ica’s dependency on ex e nal economic condi ions. In e - egional spillo e s
wi hin La in Ame ica appea weake , sugges ing a limi ed capaci y o hese economies o
impac each o he ’s s abili y.
The indings unde sco e an asymme ical spillo e s uc u e, whe e global and U.S.-
based unce ain ies signi ican ly in luence La in Ame ica while he e e se impac emains
minimal. This in e connec edness highligh s he need o La in Ame ican policymake s
o de elop esilience s a egies o mi iga e he egion’s suscep ibili y o ex e nal shocks,
pa icula ly om dominan global economies. Regional coope a ion could play a key ole
in bols e ing economic s abili y in he ace o ongoing global unce ain ies.
4.2. In e nal and Ex e nal Connec edness Findings
The in e nal connec edness calcula ions we e conduc ed by g ouping EPU index e-
u ns ac oss key La in Ame ican economies—B azil, Chile, Colombia, and Mexico. These
egional indices we e analyzed in isola ion o assess hei in e nal spillo e s and in e de-
pendencies. In con as , he ex e nal connec edness calcula ions included a b oade se o
in e na ional egions, comp ising he Uni ed S a es, Eu ope, Japan, and a global EPU index.
This di ision allowed o a ocused analysis o spillo e s wi hin La in Ame ica (in e nal)
e sus hose in luenced by ex e nal global ac o s, p o iding a comp ehensi e iew o bo h
in a- egional and c oss- egional economic policy unce ain y dynamics.
4.2.1. Dynamic To al Connec edness Index (TCI)
Figu e 6p o ides a dynamic iew o he o al connec edness index (TCI) o e ime,
cap u ing a ious laye s o economic policy unce ain y spillo e s ac oss global and La in
Ame ican economies. The black shaded a ea, ep esen ing he o al TCI, e lec s he in-
e connec edness ha combines in e nal and ex e nal spillo e s. Consis en ly high TCI
alues unde sco e a pe sis en in e dependence in economic unce ain y ac oss ma ke s,
wi h no able peaks aligning wi h global economic c ises o egional dis u bances. This
Economies 2025,13, 11 17 o 28
con i ms he obse a ions om Figu e 5and Table 3, highligh ing signi ican global and
U.S.-based in luences.
Economies 2025, 13, x FOR PEER REVIEW 17 o 29
4.2.1. Dynamic To al Connec edness Index (TCI)
Figu e 6 p o ides a dynamic iew o he o al connec edness index (TCI) o e ime,
cap u ing a ious laye s o economic policy unce ain y spillo e s ac oss global and La in
Ame ican economies. The black shaded a ea, ep esen ing he o al TCI, e lec s he in e -
connec edness ha combines in e nal and ex e nal spillo e s. Consis en ly high TCI al-
ues unde sco e a pe sis en in e dependence in economic unce ain y ac oss ma ke s,
wi h no able peaks aligning wi h global economic c ises o egional dis u bances. This
con i ms he obse a ions om Figu e 5 and Table 3, highligh ing signi ican global and
U.S.-based in luences.
The ed line in Figu e 6 indica es he TCI when ocusing solely on in e nal spillo e s
wi hin speci ic egions o en i ies, e ealing consis en ly lowe le els han he o al TCI.
This gap sugges s ha ex e nal in luences domina e unce ain y spillo e s while egional
connec ions a e impo an . This suppo s he indings in Figu e 5 and Table 3, whe e La in
Ame ican economies appea mo e as ecipien s han ansmi e s o unce ain y, wi h a
s onge eliance on ex e nal economic dynamics.
The g een line, ep esen ing global connec edness, highligh s global economic unce -
ain y’s s able in luence on egional and local ma ke s. This consis ency e lec s he ongo-
ing impac o in e na ional economic policy changes and global e en s on La in Ame ican
s abili y, as illus a ed in Figu e 5.
Finally, he blue line, which cap u es connec edness wi hin La in Ame ica, emains
he lowes among he indices. This sugges s ha while La in Ame ican economies ha e
some deg ee o in e connec edness, hey a e p ima ily shaped by global in luences a he
han by each o he . The ela i ely limi ed in a- egional connec edness indica es ha ex-
e nal shocks a e a mo e signi ican sou ce o unce ain y han egional linkages.
Figu e 6. Dynamic o al connec edness index (TCI) ac oss global and La in Ame ican economies.
No es: The black shaded a ea ep esen s he TCI index including all ex e nal spillo e s. The ed line
indica es he TCI conside ing only in e nal spillo e s in La in Ame ican economies—B azil, Chile,
Colombia, and Mexico. The g een line illus a es he connec edness on a global scale, while he blue
line ep esen s he connec edness wi hin La in Ame ica (La am). Sou ce: au ho s’ own esea ch.
O e all, Figu e 6 ein o ces he laye ed na u e o economic policy unce ain y spillo-
e s, con i ming ha La in Ame ican economies a e mo e ulne able o global and U.S.-
d i en unce ain ies han in e nal luc ua ions. This pa e n unde sco es he need o La in
Figu e 6. Dynamic o al connec edness index (TCI) ac oss global and La in Ame ican economies.
No es: The black shaded a ea ep esen s he TCI index including all ex e nal spillo e s. The ed line
indica es he TCI conside ing only in e nal spillo e s in La in Ame ican economies—B azil, Chile,
Colombia, and Mexico. The g een line illus a es he connec edness on a global scale, while he blue
line ep esen s he connec edness wi hin La in Ame ica (La am). Sou ce: au ho s’ own esea ch.
The ed line in Figu e 6indica es he TCI when ocusing solely on in e nal spillo e s
wi hin speci ic egions o en i ies, e ealing consis en ly lowe le els han he o al TCI.
This gap sugges s ha ex e nal in luences domina e unce ain y spillo e s while egional
connec ions a e impo an . This suppo s he indings in Figu e 5and Table 3, whe e La in
Ame ican economies appea mo e as ecipien s han ansmi e s o unce ain y, wi h a
s onge eliance on ex e nal economic dynamics.
The g een line, ep esen ing global connec edness, highligh s global economic unce -
ain y’s s able in luence on egional and local ma ke s. This consis ency e lec s he ongoing
impac o in e na ional economic policy changes and global e en s on La in Ame ican
s abili y, as illus a ed in Figu e 5.
Finally, he blue line, which cap u es connec edness wi hin La in Ame ica, emains he
lowes among he indices. This sugges s ha while La in Ame ican economies ha e some
deg ee o in e connec edness, hey a e p ima ily shaped by global in luences a he han
by each o he . The ela i ely limi ed in a- egional connec edness indica es ha ex e nal
shocks a e a mo e signi ican sou ce o unce ain y han egional linkages.
O e all, Figu e 6 ein o ces he laye ed na u e o economic policy unce ain y
spillo e s, con i ming ha La in Ame ican economies a e mo e ulne able o global and
U.S.-d i en unce ain ies han in e nal luc ua ions. This pa e n unde sco es he need o
La in Ame ican policymake s o ocus on esilience s a egies ha can mi iga e he impac
o ex e nal economic shocks, a he han elying solely on in a- egional coope a ion.
4.2.2. Ne To al Di ec ional Connec edness
Figu e 7p o ides a de ailed iew o ne di ec ional connec edness by sepa a ing
ex e nal and in e nal spillo e s o each egion, adding dep h o he insigh s om he TCI,
which con i ms he esul s ob ained in Figu es 5and 6and Table 3. Fo La in Ame ican
economies—B azil, Mexico, Chile, and Colombia—ex e nal spillo e s consis en ly su pass
in e nal ones, e lec ing hei s ong dependence on global economic condi ions. While
Economies 2025,13, 11 18 o 28
B azil and Mexico show some a iabili y in hei in luence wi hin La in Ame ica, hey
emain p edominan ly in luenced by ex e nal ac o s, ein o cing indings in ea lie igu es
and ables.
Economies 2025, 13, x FOR PEER REVIEW 18 o 29
Ame ican policymake s o ocus on esilience s a egies ha can mi iga e he impac o
ex e nal economic shocks, a he han elying solely on in a- egional coope a ion.
4.2.2. Ne To al Di ec ional Connec edness
Figu e 7 p o ides a de ailed iew o ne di ec ional connec edness by sepa a ing ex-
e nal and in e nal spillo e s o each egion, adding dep h o he insigh s om he TCI,
which con i ms he esul s ob ained in Figu es 5 and 6 and Table 3. Fo La in Ame ican
economies—B azil, Mexico, Chile, and Colombia—ex e nal spillo e s consis en ly su -
pass in e nal ones, e lec ing hei s ong dependence on global economic condi ions.
While B azil and Mexico show some a iabili y in hei in luence wi hin La in Ame ica,
hey emain p edominan ly in luenced by ex e nal ac o s, ein o cing indings in ea lie
igu es and ables.
De eloped egions like Eu ope and Japan exhibi high, s able ex e nal connec edness,
affi ming hei ole as majo sou ces o global EPU spillo e s, pa icula ly Eu ope’s a -
eaching impac . The Uni ed S a es s ands ou wi h one o he highes le els o ex e nal
connec edness, unde sco ing i s ole as a key ansmi e o economic unce ain y, espe-
cially affec ing La in Ame ican economies like Mexico.
The global EPU (RGEPU) subplo shows con inuous ex e nal connec edness, illus-
a ing how global e en s consis en ly in luence indi idual ma ke s, echoing he in e con-
nec ed na u e highligh ed in he TCI, as shown in Figu e 6. O e ime, ex e nal spillo e s
domina e ac oss egions, pa icula ly affec ing La in Ame ica, which shows limi ed in e -
nal esilience. This pa e n unde sco es La in Ame ica’s ulne abili y o unce ain ies
om ad anced economies, emphasizing he need o esilience s a egies o mi iga e hese
impac s.
Figu e 7. Ne o al di ec ional connec edness: ex e nal and in e nal spillo e s. No es: he black
shaded a eas ep esen connec edness h ough ex e nal spillo e s, while he ed lines indica e in-
e nal spillo e s. Sou ce: au ho s’ own esea ch.
Figu e 7. Ne o al di ec ional connec edness: ex e nal and in e nal spillo e s. No es: he black
shaded a eas ep esen connec edness h ough ex e nal spillo e s, while he ed lines indica e in e nal
spillo e s. Sou ce: au ho s’ own esea ch.
De eloped egions like Eu ope and Japan exhibi high, s able ex e nal connec edness,
a i ming hei ole as majo sou ces o global EPU spillo e s, pa icula ly Eu ope’s a -
eaching impac . The Uni ed S a es s ands ou wi h one o he highes le els o ex e nal
connec edness, unde sco ing i s ole as a key ansmi e o economic unce ain y, especially
a ec ing La in Ame ican economies like Mexico.
The global EPU (RGEPU) subplo shows con inuous ex e nal connec edness, illus a -
ing how global e en s consis en ly in luence indi idual ma ke s, echoing he in e connec ed
na u e highligh ed in he TCI, as shown in Figu e 6. O e ime, ex e nal spillo e s domina e
ac oss egions, pa icula ly a ec ing La in Ame ica, which shows limi ed in e nal esilience.
This pa e n unde sco es La in Ame ica’s ulne abili y o unce ain ies om ad anced
economies, emphasizing he need o esilience s a egies o mi iga e hese impac s.
4.2.3. To al Di ec ional Connec edness Recei ed om Ex e nal and In e nal Spillo e s
Figu e 8highligh s he impac o ex e nal and in e nal EPU index e u n spillo e s
on a ious egions, building on insigh s om Table 3and Figu es 5–7. La in Ame ican
economies—B azil, Mexico, Chile, and Colombia—show consis en ly high le els o ex e nal
spillo e s, unde sco ing hei eliance on global economic condi ions. In e nal spillo e s
emain minimal, con i ming hese economies’ limi ed esilience agains ex e nal in luences,
wi h Mexico’s s abili y closely ied o U.S. policy unce ain ies.
Economies 2025,13, 11 19 o 28
Economies 2025, 13, x FOR PEER REVIEW 19 o 29
4.2.3. To al Di ec ional Connec edness Recei ed om Ex e nal and In e nal Spillo e s
Figu e 8 highligh s he impac o ex e nal and in e nal EPU index e u n spillo e s
on a ious egions, building on insigh s om Table 3 and Figu es 5–7. La in Ame ican
economies—B azil, Mexico, Chile, and Colombia—show consis en ly high le els o ex e -
nal spillo e s, unde sco ing hei eliance on global economic condi ions. In e nal spillo-
e s emain minimal, con i ming hese economies’ limi ed esilience agains ex e nal in-
luences, wi h Mexico’s s abili y closely ied o U.S. policy unce ain ies.
De eloped egions like Eu ope, Japan, and he Uni ed S a es show s able ex e nal
spillo e pa e ns. Howe e , he U.S. s ands ou wi h a s onge in e nal spillo e in lu-
ence, indica ing ha domes ic ac o s play a la ge ole in shaping i s connec edness, e-
in o cing i s cen al posi ion in global economic s abili y.
The global EPU (RGEPU) emains s eadily impac ed by ex e nal unce ain ies, con-
i ming he pe asi e effec o global economic shocks. Figu e 8 eaffi ms ha ex e nal
spillo e s gene ally exceed in e nal ones wo ldwide, sugges ing ha global e en s like
ade ensions and he pandemic heigh en in e dependence ac oss egions.
Then, Figu e 8 illus a es he dominan ole o ex e nal spillo e s in La in Ame ica’s
economic s abili y and highligh s he esilience o de eloped economies agains global
shocks. These indings unde sco e he need o La in Ame ican coun ies o s eng hen
esilience s a egies o mi iga e he effec s o global economic luc ua ions.
Figu e 8. To al di ec ional connec edness ecei ed om ex e nal and in e nal spillo e s. No es: he
black shaded a eas ep esen connec edness due o ex e nal spillo e s, while he ed lines indica e
in e nal spillo e s. Sou ce: au ho s’ own esea ch.
4.2.4. To al Di ec ional Connec edness T ansmi ed o O he Economies: Ex e nal and
In e nal Spillo e s
Figu e 9 p o ides insigh s in o he o al di ec ional connec edness ansmi ed by
each economy, diffe en ia ing be ween ex e nal and in e nal spillo e s. This igu e ein-
o ces p e ious indings om Table 3 and Figu es 5–8, highligh ing a consis en pa e n
whe e La in Ame ican economies—B azil, Mexico, Chile, and Colombia—exhibi highe
Figu e 8. To al di ec ional connec edness ecei ed om ex e nal and in e nal spillo e s. No es: he
black shaded a eas ep esen connec edness due o ex e nal spillo e s, while he ed lines indica e
in e nal spillo e s. Sou ce: au ho s’ own esea ch.
De eloped egions like Eu ope, Japan, and he Uni ed S a es show s able ex e nal
spillo e pa e ns. Howe e , he U.S. s ands ou wi h a s onge in e nal spillo e in luence,
indica ing ha domes ic ac o s play a la ge ole in shaping i s connec edness, ein o cing
i s cen al posi ion in global economic s abili y.
The global EPU (RGEPU) emains s eadily impac ed by ex e nal unce ain ies, con-
i ming he pe asi e e ec o global economic shocks. Figu e 8 ea i ms ha ex e nal
spillo e s gene ally exceed in e nal ones wo ldwide, sugges ing ha global e en s like
ade ensions and he pandemic heigh en in e dependence ac oss egions.
Then, Figu e 8illus a es he dominan ole o ex e nal spillo e s in La in Ame ica’s
economic s abili y and highligh s he esilience o de eloped economies agains global
shocks. These indings unde sco e he need o La in Ame ican coun ies o s eng hen
esilience s a egies o mi iga e he e ec s o global economic luc ua ions.
4.2.4. To al Di ec ional Connec edness T ansmi ed o O he Economies: Ex e nal and
In e nal Spillo e s
Figu e 9p o ides insigh s in o he o al di ec ional connec edness ansmi ed by each
economy, di e en ia ing be ween ex e nal and in e nal spillo e s. This igu e ein o ces
p e ious indings om Table 3and Figu es 5–8, highligh ing a consis en pa e n whe e
La in Ame ican economies—B azil, Mexico, Chile, and Colombia—exhibi highe ex e nal
han in e nal spillo e s. While hese coun ies do in luence hei egional coun e pa s,
hei connec edness is p ima ily shaped by ex e nal ac o s, con i ming La in Ame ica’s
limi ed ole as a ansmi e o economic unce ain y. Mexico, in pa icula , shows s able
le els o ex e nal spillo e s, e lec ing i s economic in eg a ion wi h he U.S. and No h
Ame ican ade ne wo ks, a inding p e iously obse ed in Figu e 8.
Economies 2025,13, 11 20 o 28
Economies 2025, 13, x FOR PEER REVIEW 20 o 29
ex e nal han in e nal spillo e s. While hese coun ies do in luence hei egional coun-
e pa s, hei connec edness is p ima ily shaped by ex e nal ac o s, con i ming La in
Ame ica’s limi ed ole as a ansmi e o economic unce ain y. Mexico, in pa icula ,
shows s able le els o ex e nal spillo e s, e lec ing i s economic in eg a ion wi h he U.S.
and No h Ame ican ade ne wo ks, a inding p e iously obse ed in Figu e 8.
De eloped economies, including he U.S., Eu ope, and Japan, con inue o demon-
s a e subs an ial and s able ex e nal spillo e s, con i ming hei signi ican in luence on
global ma ke s. The U.S., in pa icula , shows he highes le el o ex e nal spillo e s, un-
de sco ing i s pi o al ole in he global inancial sys em and s ong economic ies, espe-
cially wi h La in Ame ica. This inding aligns wi h he obse a ions in Figu es 5 and 7,
whe e he U.S. and global EPU appea ed as cen al d i e s o economic policy unce ain y.
Eu ope’s s eady ex e nal spillo e s also ein o ce i s subs an ial impac on global eco-
nomic s abili y, consis en wi h esul s ac oss p e ious analyses.
The dominance o ex e nal spillo e s ac oss all egions in Figu e 9 e lec s he high
deg ee o in e dependence among global ma ke s. La in Ame ican economies a e mo e
impac ed by ex e nal unce ain ies han hey con ibu e, unde sco ing hei ulne abili y
o global shi s, especially hose o igina ing om he U.S. and global EPU. This asymme y
emphasizes he impo ance o La in Ame ican coun ies de eloping esilience s a egies
ha educe dependency on ex e nal economic condi ions, an obse a ion also suppo ed
by Figu es 6 and 8. Addi ionally, i highligh s he leading ole o de eloped economies in
shaping global economic policy unce ain y, affi ming he cen al in luence o he U.S. and
global EPU in d i ing in e connec edness wi hin he global inancial sys em.
Figu e 9. To al di ec ional connec edness ansmi ed o o he economies: ex e nal and in e nal spill-
o e s. No es: he black shaded a eas ep esen connec edness due o ex e nal spillo e s, while he
ed lines indica e in e nal spillo e s. Sou ce: au ho s’ own esea ch.
4.2.5. In e nal Ne Pai wise To al Di ec ional Connec edness Among Economies
Figu e 10 offe s a ocused analysis o in e nal ne pai wise o al di ec ional connec -
edness, showing how EPU index e u ns low be ween indi idual economies o e ime.
Figu e 9. To al di ec ional connec edness ansmi ed o o he economies: ex e nal and in e nal
spillo e s. No es: he black shaded a eas ep esen connec edness due o ex e nal spillo e s, while
he ed lines indica e in e nal spillo e s. Sou ce: au ho s’ own esea ch.
De eloped economies, including he U.S., Eu ope, and Japan, con inue o demons a e
subs an ial and s able ex e nal spillo e s, con i ming hei signi ican in luence on global
ma ke s. The U.S., in pa icula , shows he highes le el o ex e nal spillo e s, unde sco ing
i s pi o al ole in he global inancial sys em and s ong economic ies, especially wi h
La in Ame ica. This inding aligns wi h he obse a ions in Figu es 5and 7, whe e he
U.S. and global EPU appea ed as cen al d i e s o economic policy unce ain y. Eu ope’s
s eady ex e nal spillo e s also ein o ce i s subs an ial impac on global economic s abili y,
consis en wi h esul s ac oss p e ious analyses.
The dominance o ex e nal spillo e s ac oss all egions in Figu e 9 e lec s he high
deg ee o in e dependence among global ma ke s. La in Ame ican economies a e mo e
impac ed by ex e nal unce ain ies han hey con ibu e, unde sco ing hei ulne abili y
o global shi s, especially hose o igina ing om he U.S. and global EPU. This asymme y
emphasizes he impo ance o La in Ame ican coun ies de eloping esilience s a egies
ha educe dependency on ex e nal economic condi ions, an obse a ion also suppo ed
by Figu es 6and 8. Addi ionally, i highligh s he leading ole o de eloped economies in
shaping global economic policy unce ain y, a i ming he cen al in luence o he U.S. and
global EPU in d i ing in e connec edness wi hin he global inancial sys em.
4.2.5. In e nal Ne Pai wise To al Di ec ional Connec edness Among Economies
Figu e 10 o e s a ocused analysis o in e nal ne pai wise o al di ec ional connec -
edness, showing how EPU index e u ns low be ween indi idual economies o e ime.
Each subplo illus a es a unique pai wise ela ionship, highligh ing di ec ional in luence
h ough pe iods o ne posi i e connec edness (black shaded a eas o ou wa d in lu-
ence) and ne nega i e connec edness ( ed lines o inwa d in luence). This de ailed iew
complemen s he b oade ends in p e ious igu es by cap u ing he dynamic, bila e al
in e ac ions be ween speci ic economies.
Economies 2025,13, 11 21 o 28
Economies 2025, 13, x FOR PEER REVIEW 21 o 29
Each subplo illus a es a unique pai wise ela ionship, highligh ing di ec ional in luence
h ough pe iods o ne posi i e connec edness (black shaded a eas o ou wa d in luence)
and ne nega i e connec edness ( ed lines o inwa d in luence). This de ailed iew com-
plemen s he b oade ends in p e ious igu es by cap u ing he dynamic, bila e al in e -
ac ions be ween speci ic economies.
B azil and Mexico s and ou in La in Ame ica wi h s onge ou going connec edness
owa d o he La in Ame ican coun ies, e lec ing hei cen al economic oles wi hin he
egion. Fo example, B azil’s in luence on Colombia and Mexico’s on Chile e eal how
EPU spillo e s p opaga e egionally, al hough he in ensi y o hese connec ions a ies
o e ime. Despi e hei egional impac , La in Ame ican economies gene ally exhibi
weake pai wise connec ions wi h de eloped economies, indica ing ha in e nal dynam-
ics wi hin La in Ame ica a e mo e p onounced han hei di ec in luence om o on
global playe s.
Fo de eloped economies, such as he U.S., Eu ope, and Japan, Figu e 10 e eals
mo e consis en bidi ec ional spillo e s. The U.S., in pa icula , shows ou going solid in-
luence on La in Ame ican economies like Mexico and B azil, ein o cing i s ole as a sig-
ni ican sou ce o EPU o he egion. The ela ionship be ween he U.S. and Eu ope dis-
plays s able, high le els o mu ual in luence, e lec ing a igh ly in e connec ed dynamic
be ween hese majo economies. While in luen ial globally, Japan shows lowe connec -
edness wi h La in Ame ican coun ies, unde sco ing i s ela i ely limi ed di ec economic
ies o he egion.
Figu e 10. In e nal ne pai wise o al di ec ional connec edness among economies. Sou ce: au ho s’
own esea ch.
Figu e 10. In e nal ne pai wise o al di ec ional connec edness among economies. Sou ce: au ho s’
own esea ch.
B azil and Mexico s and ou in La in Ame ica wi h s onge ou going connec edness
owa d o he La in Ame ican coun ies, e lec ing hei cen al economic oles wi hin he
egion. Fo example, B azil’s in luence on Colombia and Mexico’s on Chile e eal how
EPU spillo e s p opaga e egionally, al hough he in ensi y o hese connec ions a ies o e
ime. Despi e hei egional impac , La in Ame ican economies gene ally exhibi weake
pai wise connec ions wi h de eloped economies, indica ing ha in e nal dynamics wi hin
La in Ame ica a e mo e p onounced han hei di ec in luence om o on global playe s.
Fo de eloped economies, such as he U.S., Eu ope, and Japan, Figu e 10 e eals mo e
consis en bidi ec ional spillo e s. The U.S., in pa icula , shows ou going solid in luence
on La in Ame ican economies like Mexico and B azil, ein o cing i s ole as a signi ican
sou ce o EPU o he egion. The ela ionship be ween he U.S. and Eu ope displays s able,
high le els o mu ual in luence, e lec ing a igh ly in e connec ed dynamic be ween hese
majo economies. While in luen ial globally, Japan shows lowe connec edness wi h La in
Ame ican coun ies, unde sco ing i s ela i ely limi ed di ec economic ies o he egion.
In conclusion, Figu e 10 highligh s he laye ed s uc u e o EPU spillo e s, whe e
egional dynamics wi hin La in Ame ica coexis alongside subs an ial in luence om
majo global economies. B azil and Mexico eme ge as egional ansmi e s wi hin La in
Ame ica, while he U.S. and global EPU play dominan oles in he global ne wo k, shaping
b oade EPU ends. This in e connec edness unde sco es he need o La in Ame ican
economies o ac i ely moni o bo h egional and global sou ces o unce ain y o s eng hen
economic s abili y.
Economies 2025,13, 11 22 o 28
4.2.6. Ex e nal Ne Pai wise To al Di ec ional Connec edness Among Economies
Figu e 11 p o ides a de ailed iew o ex e nal ne pai wise o al di ec ional connec -
edness, illus a ing how EPU index e u ns low be ween indi idual coun ies o egions.
Each subplo cap u es a speci ic pai wise ela ionship, dis inguishing be ween pe iods o
ne posi i e (ou wa d in luence) and ne nega i e (inwa d in luence) connec edness. This
igu e enhances he unde s anding o bila e al EPU spillo e s, e ealing which economies
ac as p ima y sou ces o ecipien s o unce ain y o e ime, complemen ing he b oade
ends obse ed in p e ious igu es.
Economies 2025, 13, x FOR PEER REVIEW 23 o 29
Figu e 11. Ex e nal ne pai wise o al di ec ional connec edness among economies. Sou ce: au ho s’
own esea ch.
5. Discussion
Ou analysis o EPU index e u n spillo e s in La in Ame ican and global economies
aligns wi h indings om An onakakis e al. (2018), Zhou e al. (2022), K.-H. Wang e al.
(2023), and Kayani e al. (2024), who simila ly explo e EPU dynamics ac oss de eloped
and eme ging economies. Each o hese s udies p o ides aluable con ex o unde s and-
ing he c oss-na ional ansmission o EPU and highligh s he a ying oles ha diffe en
economies play wi hin his in e connec ed sys em.
By add essing RH1, An onakakis e al.’s (2018) esea ch on EPU spillo e s p ima ily
among de eloped economies iden i ies signi ican ansmission om he Eu opean Union
o he U.S., unde sco ing ex e nal ac o s’ in luence on economic s abili y. Ou indings
pa allel his dynamic, as La in Ame ican coun ies show high sensi i i y o ex e nal spill-
o e s, pa icula ly om he U.S. and global EPU indices. This pa e n suppo s An ona-
kakis e al.’s obse a ion ha ex e nal d i e s can subs an ially impac domes ic unce -
ain y, especially in economies wi h s ong ies o de eloped egions. Bo h s udies high-
ligh he impo ance o unde s anding hese ex e nal in luences, pa icula ly o e longe
ime ho izons, whe e hei impac becomes mo e p onounced. Fo La in Ame ican poli-
cymake s, his insigh unde sco es he need o s a egic planning o buffe agains sus-
ained ex e nal unce ain y.
By answe ing RH2, Zhou e al.’s (2022) s udy expands on he global EPU ne wo k by
using spillo e indices and block models, inding ha EPU spillo e s inc ease signi i-
can ly du ing ex eme e en s like COVID-19. Simila ly, ou analysis shows ha La in
Ame ican economies, pa icula ly B azil and Mexico, expe ience in ensi ied spillo e s
om global sou ces du ing pe iods o global c isis. Zhou’s block model u he ca ego-
izes coun ies in o dis inc spillo e blocks, which highligh s he impo ance o ex e nal
Figu e 11. Ex e nal ne pai wise o al di ec ional connec edness among economies. Sou ce: au ho s’
own esea ch.
In La in Ame ica, B azil and Mexico consis en ly demons a e ou going in luence
on o he La in Ame ican coun ies, such as Chile and Colombia, posi ioning hem as key
ansmi e s o policy unce ain y wi hin he egion. This ole aligns wi h he indings
in Figu e 10, whe e B azil and Mexico eme ged as cen al playe s in egional spillo e s.
Howe e , hei in e ac ions wi h de eloped egions—pa icula ly he U.S. and global
EPU—show hese La in Ame ican economies mo e o en as ecipien s o EPU, highligh ing
hei suscep ibili y o ex e nal shocks om la ge economies. This end con i ms ea lie
obse a ions in Table 3and Figu e 6 h ough Figu e 8, which indica ed a dependency o
La in Ame ican economies on global unce ain ies.
The U.S. and global EPU in de eloped economies demons a e high and s able ou go-
ing spillo e e ec s, ein o cing hei posi ions as p ima y ansmi e s o policy unce ain y
ac oss egions. The U.S., wi h no able spillo e s di ec ed owa d La in Ame ican coun ies
like Mexico and B azil, unde sco es i s in luen ial ole in shaping egional EPU dynamics.
Eu ope’s ela ionships, including wi h Japan and global agg ega es, u he demons a e
i s subs an ial impac on bo h de eloped and eme ging ma ke s. While in luen ial glob-
Economies 2025,13, 11 23 o 28
ally, Japan shows compa a i ely weake spillo e e ec s on La in Ame ica, sugges ing
limi ed di ec ansmission o i s policy unce ain y o he egion, consis en wi h indings
in p e ious igu es.
In summa y, Figu e 11 unde sco es he complex ne wo k o ex e nal EPU spillo e s,
whe e B azil and Mexico a e no able sou ces o egional policy unce ain y wi hin La in
Ame ica, while he U.S. and global EPU ac as majo ansmi e s o EPU on a global
scale. These bila e al ela ionships emphasize La in Ame ica’s ulne abili y o ex e nal
shocks, especially om de eloped economies, unde sco ing he need o La in Ame ican
policymake s o accoun o bo h egional and global unce ain ies when c a ing s a egies
o enhance economic esilience and s abili y.
5. Discussion
Ou analysis o EPU index e u n spillo e s in La in Ame ican and global economies
aligns wi h indings om An onakakis e al. (2018), Zhou e al. (2022), K.-H. Wang e al.
(2023), and Kayani e al. (2024), who simila ly explo e EPU dynamics ac oss de eloped and
eme ging economies. Each o hese s udies p o ides aluable con ex o unde s anding
he c oss-na ional ansmission o EPU and highligh s he a ying oles ha di e en
economies play wi hin his in e connec ed sys em.
By add essing RH1, An onakakis e al.’s (2018) esea ch on EPU spillo e s p ima -
ily among de eloped economies iden i ies signi ican ansmission om he Eu opean
Union o he U.S., unde sco ing ex e nal ac o s’ in luence on economic s abili y. Ou
indings pa allel his dynamic, as La in Ame ican coun ies show high sensi i i y o ex e -
nal spillo e s, pa icula ly om he U.S. and global EPU indices. This pa e n suppo s
An onakakis e al.’s
obse a ion ha ex e nal d i e s can subs an ially impac domes ic
unce ain y, especially in economies wi h s ong ies o de eloped egions. Bo h s udies
highligh he impo ance o unde s anding hese ex e nal in luences, pa icula ly o e
longe ime ho izons, whe e hei impac becomes mo e p onounced. Fo La in Ame ican
policymake s, his insigh unde sco es he need o s a egic planning o bu e agains
sus ained ex e nal unce ain y.
By answe ing RH2, Zhou e al.’s (2022) s udy expands on he global EPU ne wo k by
using spillo e indices and block models, inding ha EPU spillo e s inc ease signi ican ly
du ing ex eme e en s like COVID-19. Simila ly, ou analysis shows ha La in Ame ican
economies, pa icula ly B azil and Mexico, expe ience in ensi ied spillo e s om global
sou ces du ing pe iods o global c isis. Zhou’s block model u he ca ego izes coun ies
in o dis inc spillo e blocks, which highligh s he impo ance o ex e nal EPU sou ces o
mo e ulne able economies. The indings sugges a simila s uc u e in La in Ame ica,
wi h B azil and Mexico ac ing as egional ansmi e s bu emaining dependen on EPU
om la ge economies. This laye ed model e lec s he need o esilience s a egies o
coun e ac ex e nal ulne abili ies.
By add essing RH3, he s udy conduc ed by Kayani e al. (2024) on BRIC coun ies
e eals ha global EPU, pa icula ly om dominan economies, subs an ially impac s
eme ging ma ke s, wi h B azil showing he lowes g oss EPU spillo e wi hin he BRIC
g oup. This is consis en wi h ou indings, whe e B azil and Mexico unc ion p ima ily as
an EPU ecei e wi hin La in Ame ica a he han as a signi ican ansmi e . Kayani also
highligh s he di e si y in di ec ional spillo e s among BRIC na ions, which aligns wi h ou
obse a ions in La in Ame ica. Fo ins ance, Mexico’s close economic in eg a ion wi h he
U.S. esul s in mo e s able ex e nal spillo e s, while o he La in Ame ican coun ies exhibi
di e en sensi i i y le els. Bo h s udies sugges ha eme ging ma ke s mus de elop
s a egies o manage hese spillo e impac s, emphasizing in e na ional coope a ion’s
impo ance in add essing EPU ulne abili ies.
Economies 2025,13, 11 24 o 28
By answe ing RH4, K.-H. Wang e al.’s (2023) s udy on he ela ionship be ween
China’s EPU and ASEAN coun ies’ geopoli ical isk (GPR) highligh s he in luence o
ex e nal shocks on egional s abili y. Simila o Wang’s indings, ou s udy shows ha
La in Ame ican economies a e signi ican ly a ec ed by ex e nal EPU, pa icula ly du ing
global c ises. Wang’s analysis o he e ogeneous spillo e e ec s also esona es wi h ou
indings. A he same ime, ex e nal EPU impac s all La in Ame ican economies, and he
in ensi y a ies based on economic linkages, as seen wi h Mexico’s s onge connec ion
o he U.S. Fu he mo e, Wang sugges s ha enhancing ins i u ional quali y can educe
ulne abili y o ex e nal EPU. This ecommenda ion is also applicable in La in Ame ica,
whe e s eng hening in e nal amewo ks could help mi iga e he in luence o ex e nal
unce ain ies om dominan global playe s.
In conclusion, by add essing RH5, ou s udy suppo s he indings o An onakakis e al.
(2018), Zhou e al. (2022), K.-H. Wang e al. (2023), and Kayani e al. (2024), highligh ing
he signi ican ole o ex e nal EPU in shaping he s abili y o eme ging ma ke s. The
in e connec ed na u e o mode n economies unde sco es he impo ance o esilience
s a egies, especially o La in Ame ican coun ies ha a e hea ily in luenced by U.S. and
global EPU dynamics. S eng hening ins i u ional capaci y, os e ing egional coope a ion,
and adop ing p oac i e policy measu es a e c i ical s eps o La in Ame ican policymake s
o manage hese ex e nal isks e ec i ely. These collec i e insigh s ein o ce he need o
eme ging economies o be equipped o inc eased ola ili y, pa icula ly du ing global
c ises, o main ain economic s abili y in an in e connec ed wo ld.
The indings om his s udy unde sco e he impo ance o ecognizing in e connec ed
economic unce ain ies ac oss La in Ame ica, p o iding policymake s wi h insigh s in o
s a egies o s eng hening esilience agains ex e nal shocks. Thus, by add essing RH4
and RH5, iden i ying and analyzing he spillo e e ec s o he EPU index e u ns, La in
Ame ican economies can ake p oac i e measu es o limi hei ulne abili y o global
luc ua ions. Key s a egies include ade di e si ica ion, which would educe dependence
on speci ic ma ke s o commodi ies, and adap ing mone a y policy o manage exchange
a e ola ili y and in la ion in esponse o global economic shi s. Regional collabo a ion
h ough amewo ks like he Paci ic Alliance and Me cosu could also signi ican ly educe
sha ed isks, as aligned policy esponses and coope a i e economic in eg a ion could os e
inancial s abili y ac oss bo de s. Addi ionally, La in Ame ican mone a y and inancial
au ho i ies could bene i om de eloping join con ingency plans and pooling esou ces o
espond o unexpec ed shocks, especially du ing pe iods o heigh ened global unce ain y.
La in Ame ica’s economic landscape is shaped by unique sou ces o unce ain y, in-
cluding high dependence on commodi ies, exposu e o global inancial ma ke s, and poli i-
cal ola ili y. Hea y eliance on commodi ies means ha luc ua ions in global commodi y
p ices can signi ican ly impac hese economies, heigh ening hei ulne abili y du ing ma -
ke down u ns. Exposu e o global inancial lows in oduces addi ional isks, as sudden
capi al ou lows o shi s in in es o sen imen can lead o economic ins abili y. Poli ical
isks, including policy changes ied o elec o al cycles, add o his ola ili y, o en inc eas-
ing egional unce ain y. In con as o de eloped economies wi h s onge ins i u ional
amewo ks, La in Ame ican coun ies ace he challenge o add essing hese unce ain ies
h ough egion-speci ic policies emphasizing economic di e si ica ion, s eng hened go e -
nance, and egula o y e o ms designed o minimize ex e nal impac s. This aligns wi h
RH4 and RH5, ein o cing he need o ins i u ional and egional esilience.
6. Conclusions
This s udy applies a Time-Va ying Pa ame e Vec o Au o eg essi e (TVP-VAR) model
wi h mon hly da a o examine he dynamic in e connec edness o economic policy unce -
