Dynamic linkages between economic policy uncertainty and external variables in Latin America: Wavelet analysis

Ma ín-Rod íguez, Nini Johana; González-Ruiz, Juan Da id; Bo e o, Se gio
A icle
Dynamic linkages be ween economic policy unce ain y
and ex e nal a iables in La in Ame ica: Wa ele analysis
Economies
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Sugges ed Ci a ion: Ma ín-Rod íguez, Nini Johana; González-Ruiz, Juan Da id; Bo e o, Se gio (2025) :
Dynamic linkages be ween economic policy unce ain y and ex e nal a iables in La in Ame ica:
Wa ele analysis, Economies, ISSN 2227-7099, MDPI, Basel, Vol. 13, Iss. 2, pp. 1-28,
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Published: 21 Janua y 2025
Ci a ion: Ma ín-Rod íguez, N. J.,
González-Ruiz, J. D., & Bo e o, S.
(2025). Dynamic Linkages Be ween
Economic Policy Unce ain y and
Ex e nal Va iables in La in Ame ica:
Wa ele Analysis. Economies,13(2), 22.
h ps://doi.o g/10.3390/
economies13020022
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A icle
Dynamic Linkages Be ween Economic Policy Unce ain y and
Ex e nal Va iables in La in Ame ica: Wa ele Analysis
Nini Johana Ma ín-Rod íguez 1,* , Juan Da id González-Ruiz 2and 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, Medellín 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, Medellín 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 Medellín, Medellín 050034, Colombia; [email p o ec ed]
*Co espondence: [email p o ec ed]
Abs ac : Wa ele cohe ence analysis (WCA) examines he dynamic in e ac ions be ween
economic policy unce ain y (EPU) in B azil, Chile, Colombia, and Mexico and key ex e -
nal a iables, using mon hly da a om 2010 o 2022. The indings e eal he ollowing:
(i) medium- e m co-mo emen s (4–16 mon hs) be ween EPU and global inancial indi-
ca o s, including he Chicago Boa d Op ions Exchange (CBOE) Ma ke Vola ili y Index
(RVIX), Me ill Lynch Op ion Vola ili y Es ima e Index (RMOVE), and Global EPU Index
(RGEPU), emphasizing he sus ained in luence o inancial ola ili y on domes ic policy
en i onmen s, pa icula ly du ing global u bulence; (ii) signi ican in e ac ions be ween
EPU and he Clima e Policy Unce ain y Index (RCPU) in esou ce-dependen economies
like B azil and Colombia, wi h p onounced e ec s in medium- and long- e m ho izons;
(iii) bidi ec ional ela ionships be ween B en c ude oil p ices (RBRENT) and EPU in B azil,
Colombia, and Mexico, whe e oil p ice luc ua ions shape policy unce ain y, especially
du ing global ma ke dis up ions; and (i ) no able co-mo emen s be ween EPU and he
Dow Jones Sus ainabili y Wo ld Index (RW1SGI) in B azil, Chile, and Mexico, highligh ing
sensi i i y o shi s in sus ainabili y-d i en ma ke s. These esul s unde sco e he need
o economic di e si ica ion, s eng hened inancial sa egua ds, and in eg a ed clima e
isk managemen o mi iga e ex e nal shocks. By explo ing he ime– equency dynamics
o global unce ain ies and domes ic policy en i onmen s, his s udy p o ides ac ionable
insigh s o os e ing esilience and s abili y in La in Ame ica’s in e connec ed economies
while add essing ulne abili ies o global ma ke ola ili y and sus ainabili y ansi ions.
Keywo ds: economic policy unce ain y; wa ele cohe ence analysis; inancial ola ili y;
global sus ainabili y; clima e policy unce ain y; La in Ame ica
1. In oduc ion
Economic policy unce ain y (EPU) has eme ged as a c i ical concep o unde s and-
ing he impac o policy- ela ed ambigui ies on mac oeconomic pe o mance, inancial
s abili y, and in es men decisions. Ini ially de eloped by Bake e al. (2016), EPU quan-
i ies policy- ela ed ambigui ies h ough a composi e index. This index includes h ee
componen s: he equency o newspape a icles discussing policy unce ain y, da a on
expi ing ede al ax code p o isions, and he dispe sion in economic o ecas s abou key
mac oeconomic a iables. These elemen s p o ide a comp ehensi e measu e o economic
Economies 2025,13, 22 h ps://doi.o g/10.3390/economies13020022
Economies 2025,13, 22 2 o 28
unce ain y d i en by policy ac o s. Bake e al.’s g oundb eaking wo k highligh ed how
EPU spikes du ing majo geopoli ical and economic e en s—such as igh p esiden ial
elec ions, inancial c ises, and iscal policy dispu es—a e associa ed wi h g ea e s ock p ice
ola ili y and educed in es men in policy-sensi i e sec o s. While much o he exis ing
li e a u e ocuses on ad anced economies, he unique dynamics o EPU in de eloping e-
gions, pa icula ly La in Ame ica, emain insu icien ly explo ed (Chen e al.,2024;Fuji ani
e al.,2023;Tu uncu e al.,2024;Bossman e al.,2023;Ki ikkaleli & Alola,2022). This gap is
c i ical gi en La in Ame ica’s eliance on commodi y expo s, exposu e o global ma ke
ola ili ies, and equen poli ical ins abili y, which ampli y i s suscep ibili y o ex e nal
shocks (Tan e al.,2024;Rúa & Ma ín-Rod íguez,2024).
Exis ing esea ch unde sco es he ole o ad anced economies as he ne ansmi e s
o EPU isks, while eme ging ma ke s, such as hose in La in Ame ica, p edominan ly ac
as ecei e s (Tan e al.,2024). This ansmission o en exace ba es economic ulne abili ies,
pa icula ly in commodi y-d i en economies wi h limi ed inancial bu e s. Addi ionally,
s udies ha e shown ha global EPU can signi ican ly ampli y he ola ili y o key asse
classes, including p ecious me als (Raza e al.,2023), c ea ing ipple e ec s ha esona e
s ongly in La in Ame ica due o i s hea y eliance on commodi y ma ke s. These indings
highligh he impo ance o analyzing how global and egional EPU dynamics in e ac o
in luence economic ou comes in La in Ame ica.
A he same ime, he in e play be ween EPU and en i onmen al sus ainabili y is
gaining a en ion. Resea ch examining he ela ionship be ween EPU and g een in es men s
(Su e al.,2023) sugges s ha policy unce ain y can shape he beha io o en i onmen ally
ocused asse s, wi h po en ial implica ions o egions like La in Ame ica ha a e na iga ing
ene gy ansi ions and clima e challenges. Addi ionally, indings om Syed and Bou i (2022)
indica e a complex ade-o be ween sho - e m en i onmen al deg ada ion and long- e m
imp o emen s unde high-EPU scena ios. These insigh s unde sco e he necessi y o
explo ing how EPU in e sec s wi h clima e policy, especially in La in Ame ica, whe e
economic and en i onmen al policies a e deeply in e wined.
Me hodologically, ecen ad ances in econome ic ools, such as wa ele analysis, o e
obus amewo ks o disen angling he empo al and equency-dependen ela ionships
be ween EPU and economic a iables. S udies employing wa ele app oaches, such as
Shahzad e al. (2018), ha e demons a ed hei e ec i eness in cap u ing sho -, medium-,
and long- e m in e ac ions, making hem pa icula ly sui able o unde s anding he mul i-
ace ed impac s o EPU. Addi ionally, Rúa and Ma ín-Rod íguez (2024) p o ide a no el
pe spec i e on he ela ionship be ween he Economic Policy Unce ain y (EPU) Index and
exchange a es in La in Ame ican coun ies (B azil, Chile, Colombia, and Mexico). U iliz-
ing wa ele powe spec um (WPS) and wa ele cohe ence analysis (WCA) on mon hly
da a om Janua y 2010 o May 2022, Rúa and Ma ín-Rod íguez (2024) indica e a consis-
en posi i e co ela ion be ween EPU and exchange a es ac oss sho -, medium-, and
long- e m ho izons. These indings unde sco e he s ong connec ion be ween economic
unce ain y and exchange a e dynamics, highligh ing he need o ca e ul economic policy
managemen and he conside a ion o poli ical e en s o p omo e s abili y and economic
g ow h in hese La in Ame ican na ions. This s udy builds on hese me hods o examine
he nuanced dynamics o EPU in La in Ame ica, ocusing on i s in e ac ions wi h inancial
ma ke s, oil p ices, and clima e a iables.
The p ima y objec i e o his s udy is o explo e he dynamic linkages be ween eco-
nomic policy unce ain y (EPU) and ex e nal global a iables in La in Ame ican economies
using wa ele cohe ence analysis. Speci ically, his s udy add esses wo key ques ions:
(1) Which ex e nal a iables mos signi ican ly in luence EPU in he La in Ame ican con-
ex ? (2) How ha e EPU dynamics e ol ed o e ime, pa icula ly in esponse o global
Economies 2025,13, 22 3 o 28
economic u bulence and egional policy shi s? By ocusing on B azil, Chile, Colombia,
and Mexico—coun ies ha ep esen a signi ican po ion o La in Ame ica’s economic
ac i i y— his esea ch le e ages wa ele analysis o explo e he sho -, medium-, and
long- e m in e ac ions be ween EPU and a iables such as oil p ices and global unce -
ain y measu es, including he Global EPU (GEPU), Chicago Boa d Op ions Exchange
(CBOE) Ma ke Vola ili y Index (VIX), Me ill Lynch Op ion Vola ili y Es ima e Index
(MOVE), Clima e Policy Unce ain y (CPU) Index, and Dow Jones Sus ainabili y Wo ld
Index (W1SGI). The wa ele me hodology enables a comp ehensi e unde s anding o he
complex dynamics in luencing unce ain y in he egion.
This s udy con ibu es o he li e a u e by o e ing a comp ehensi e, egion-speci ic
analysis o EPU in La in Ame ica, p o iding aluable insigh s o policymake s and in-
es o s. The indings aim o in o m s a egies o enhancing economic esilience and
mi iga ing he ad e se impac s o EPU in he egion by iden i ying he d i e s o unce -
ain y and hei e ec s on inancial, commodi y, and clima e a iables.
This s udy is s uc u ed as ollows: Sec ion 2 e iews he li e a u e, summa izing key
hemes such as he economic and inancial impac s o policy unce ain y, global in e con-
nec ions, me hodological app oaches, and i s ela ionship wi h sus ainabili y and co po a e
s a egies. Sec ion 3desc ibes he da a and wa ele cohe ence me hodology.
Sec ion 4
p esen s coun y-speci ic empi ical indings, while Sec ion 5discusses hei b oade impli-
ca ions. Finally, Sec ion 6concludes wi h key insigh s and inal ema ks.
2. Li e a u e Re iew
Figu e 1illus a es he in e connec edness o key concep s su ounding economic
policy unce ain y (EPU) and i s implica ions, se ing as a concep ual amewo k o
analyzing i s in e ac ions. A he co e, EPU connec s wi h hemes like poli ical unce ain y,
in es men , ma ke s, and g ow h, e ealing c i ical pa hways o i s in luence on economic
sys ems. O he clus e s link EPU wi h ins i u ional quali y, ola ili y, geopoli ical isk,
en i onmen al sus ainabili y, and global e en s such as COVID-19 and oil p ice ola ili y,
emphasizing he need o add ess i s mul i ace ed e ec s in eme ging ma ke s.
Economies2025,13,xFORPEERREVIEW3o 29

economic u bulenceand egionalpolicyshi s?By ocusingonB azil,Chile,Colombia,
andMexico—coun ies ha  ep esen asigni ican po iono La inAme ica’seconomic
ac i i y— his esea chle e ageswa ele analysis oexplo e hesho -,medium-,and
long- e min e ac ionsbe weenEPUand a iablessuchasoilp icesandglobalunce -
ain ymeasu es,including heGlobalEPU(GEPU),ChicagoBoa dOp ionsExchange
(CBOE)Ma ke Vola ili yIndex(VIX),Me illLynchOp ionVola ili yEs ima eIndex
(MOVE),Clima ePolicyUnce ain y(CPU)Index,andDowJonesSus ainabili yWo ld
Index(W1SGI).Thewa ele me hodologyenablesacomp ehensi eunde s andingo  he
complexdynamicsin luencingunce ain yin he egion.
Thiss udycon ibu es o heli e a u ebyoffe ingacomp ehensi e, egion-speci ic
analysiso EPUinLa inAme ica,p o iding aluableinsigh s o policymake sandin-
es o s.The indingsaim oin o ms a egies o enhancingeconomic esilienceandmi -
iga ing head e seimpac so EPUin he egionbyiden i ying hed i e so unce ain y
and hei effec son inancial,commodi y,andclima e a iables.
Thiss udyiss uc u edas ollows:Sec ion2 e iews heli e a u e,summa izingkey
hemessuchas heeconomicand inancialimpac so policyunce ain y,globalin e con-
nec ions,me hodologicalapp oaches,andi s ela ionshipwi hsus ainabili yandco po-
a es a egies.Sec ion3desc ibes heda aandwa ele cohe enceme hodology.Sec ion
4p esen scoun y-speci icempi ical indings,whileSec ion5discusses hei b oade im-
plica ions.Finally,Sec ion6concludeswi hkeyinsigh sand inal ema ks.
2.Li e a u eRe iew
Figu e1illus a es hein e connec ednesso keyconcep ssu oundingeconomic
policyunce ain y(EPU)andi simplica ions,se ingasaconcep ual amewo k o an-
alyzingi sin e ac ions.A  heco e,EPUconnec swi h hemeslikepoli icalunce ain y,
in es men ,ma ke s,andg ow h, e ealingc i icalpa hways o i sin luenceoneco-
nomicsys ems.O he clus e slinkEPUwi hins i u ionalquali y, ola ili y,geopoli ical
isk,en i onmen alsus ainabili y,andglobale en ssuchasCOVID-19andoilp ice ol-
a ili y,emphasizing heneed oadd essi smul i ace edeffec sineme gingma ke s.

Figu e1.Co-occu encene wo ko keywo ds omsea ch e msEPUORGEPUANDde e mi-
nan s.Sou ce:au ho s’analysisusingVOS iewe wi hScopusandWebo Scienceda a.
Figu e 1. Co-occu ence ne wo k o keywo ds om sea ch e ms EPU OR GEPU AND de e minan s.
Sou ce: au ho s’ analysis using VOS iewe wi h Scopus and Web o Science da a.
The ollowing sec ions will desc ibe each clus e acco ding o i s colo , highligh ing
he eme ging ends and hei implica ions wi hin he s udy con ex .
Economies 2025,13, 22 4 o 28
2.1. Red Clus e : Economic and Financial Dimensions o Policy Unce ain y
This clus e examines how EPU in e ac s wi h inancial sys ems, ade lows, and ins i-
u ional ac o s. Key hemes include inancial de elopmen , o eign di ec in es men (FDI),
and g ow h. The li e a u e highligh s how s ong ins i u ions and di e si ica ion mi iga e
EPU’s ad e se impac s, while i e e sibili y unde sco es he long- e m cos s o delayed
e o ms. Ad anced me hods, such as Au o eg essi e Dis ibu ed Lag (ARDL) models,
cap u e he empo al and spa ial dimensions o EPU, e ealing i s ole in shaping FDI and
ma ke s abili y (T. Li e al.,2020;Maquiei a e al.,2023;Deng & Li,2024). Howe e , he
speci ic mechanisms by which EPU in luences s uc u al esilience and long- e m economic
g ow h, pa icula ly in he La in Ame ican con ex , emain unde explo ed. Add essing his
gap will con ibu e o unde s anding how policy adjus men s and s uc u al e o ms can
s eng hen economic s abili y unde unce ain y.
2.2. G een Clus e : Global In e connec ions and Me hodological App oaches o EPU
This clus e ocuses on he in e play be ween EPU, commodi ies ( o example, c ude
oil, gold, and bi coin), and global economic shocks. Key indings e eal how luc ua ions
in commodi y p ices in luence La in Ame ican economies, while digi al cu encies e lec
adap i e in es o beha io in unce ain en i onmen s (Demi & E san,2017;Benlagha
& Hem i ,2023;T. Le e al.,2023). Ad anced me hods like Au o eg essi e Condi ional
Va iance Model Wi h Mixed Da a Sampling (GARCH-MIDAS) and wa ele analysis cap-
u e EPU’s ola ili y and spillo e e ec s (Raza e al.,2023;Xiong e al.,2024;Rúa &
Ma ín-Rod íguez,2024). None heless, he e is an insu icien explo a ion o egional s a e-
gies o mi iga e he con agion and spillo e e ec s o global EPU on La in Ame ican
economies. In es iga ing hese s a egies can p o ide ac ionable ecommenda ions o
educing ex e nal ulne abili ies.
2.3. Blue Clus e : Mic o- and Mac o-Dynamics o EPU
This clus e explo es he beha io al esponses o EPU, emphasizing isk- aking, in-
es men delays, and c edi cons ain s. Poli ical unce ain y exace ba es inancial ma -
ke ins abili y, discou aging in es men and slowing g ow h (Ka anasos & Y an i,2021;
Agyemang e al.,2023). Key e ms such as in es men , isk- aking, c edi , and poli ical
unce ain y unde line how businesses and inancial sys ems eac o unce ain policy en i-
onmen s (Soni e al.,2023;Shahzad e al.,2018;Yun & Chun,2021;Abdoh & Maghye eh,
2024). Despi e hese insigh s, a ge ed policy ecommenda ions o educe EPU’s e ec s on
en ep eneu ial and in es men ac i i ies in La in Ame ica a e sca ce. De eloping such
policies can enhance he capaci y o businesses o adap and h i e amids unce ain y.
2.4. Yellow Clus e : G ow h and En i onmen al Sus ainabili y Unde EPU
This clus e highligh s he in e ac ion be ween EPU and clima e policy, emphasiz-
ing how unce ain y in ene gy and en i onmen al egula ions delays enewable ene gy
adop ion and hinde s sus ainable de elopmen (Qam uzzaman e al.,2022;Rehman e al.,
2023;A ha i,2024). Fo esou ce- ich economies, s able ene gy policies a e c i ical o
os e ing g ow h and mee ing clima e goals. Howe e , he e a e limi ed analyses o policy
amewo ks ha e ec i ely in eg a e en i onmen al sus ainabili y in o economic esilience
s a egies unde EPU. Add essing his gap can in o m mo e holis ic app oaches o balancing
g ow h and sus ainabili y in ola ile con ex s.
2.5. Pu ple Clus e : Co po a e Financial S a egies and Go e nance in Times o Economic
Policy Unce ain y
This clus e examines how i ms manage liquidi y and go e nance unde EPU. S a e-
gies like inc easing cash ese es p o ec i ms bu slow in es men , while obus go e -

Economies 2025,13, 22 5 o 28
nance amewo ks enhance decision-making and inancial pe o mance (Feng e al.,2022;
Zhao & Niu,2023;Kang & Kim,2024;Vuong e al.,2023). In La in Ame ica, whe e go -
e nance challenges pe sis , he e is insu icien ocus on how go e nance p ac ices can
add ess s uc u al challenges o mi iga e EPU’s e ec s. B idging his gap will cla i y how
i ms can op imize go e nance o main ain inancial s abili y and economic pe o mance
du ing pe iods o unce ain y.
The e iewed li e a u e iden i ies he dynamic e ec s o EPU on economic sys ems,
inancial ma ke s, and en i onmen al policies. Howe e , gaps emain in unde s anding
he speci ic mechanisms d i ing esilience, egional s a egies o mi iga e global spillo e s,
a ge ed measu es o business adap a ion, and in eg a ed app oaches o sus ainabili y.
This s udy seeks o add ess hese gaps by analyzing EPU’s mul i ace ed in e ac ions wi h
ex e nal a iables in La in Ame ica.
3. Empi ical Da a and Me hodological App oach
3.1. The Da ase
This s udy’s da ase ocuses on ou La in Ame ican coun ies—B azil, Chile, Colom-
bia, and Mexico—which sha e simila mac oeconomic s uc u es, including loa ing o
ee- loa ing exchange a e egimes and in la ion- a ge ing mone a y policies. These com-
monali ies make hem well sui ed o compa a i e analysis, as hey a e likely o espond
simila ly o global economic shocks.
The da ase includes mon hly se ies da a om Janua y 2010 o May 2022, p o iding
148 obse a ions based on Colombia’s EPU index a ailabili y. The a iables included in
he da ase co e a b oad spec um o economic, unce ain y, and en i onmen al indica-
o s, such as he Clima e Policy Unce ain y Index, he Sus ainabili y Wo ld Index, and
he B en oil p ice. Financial and unce ain y indica o s include ola ili y indices (VIX,
MOVE). This comp ehensi e in eg a ion o a iables ensu es obus empo al and sec o al
co e age, p o iding a de ailed amewo k o analyzing mac oeconomic in e ac ions in
La in Ame ica.
Table 1p o ides a de ailed lis o indices and a iables o explo ing he in ica e
ela ionships be ween economic policy unce ain y (EPU) and o he economic dimensions.
This able highligh s he di e se sou ces and me hodological app oaches unde lying each
index, emphasizing hei ele ance o his s udy’s La in Ame ican and global ocus.
The economic policy unce ain y (EPU) indices o B azil, Chile, Colombia, and Mexico
we e cons uc ed using newspape -based me hodologies pionee ed by Bake e al. (2016),
wi h adap a ions o egional con ex s by esea che s such as Ce da e al. (2016) and Gil
León and Sil a Pinzón (2019). These indices cap u e localized policy unce ain y ends
wi hin speci ic coun ies, p o iding a g anula iew o how na ional policy de elopmen s
in luence economic dynamics. Complemen ing hese is he Global EPU Index (GEPU),
which agg ega es da a om 21 coun ies o p esen a mac oeconomic pe spec i e on global
policy unce ain y, no malized o GDP weigh s and missing da a.
Table 1also includes indices measu ing inancial ma ke ola ili y and isk sen i-
men , such as he VIX (equi y ma ke ola ili y) and MOVE Index (T easu y bond ma ke
ola ili y), widely ega ded as p oxies o in es o con idence and ma ke unce ain y. The
inclusion o he Clima e Policy Unce ain y (CPU) Index, cons uc ed by Ga iilidis (2021),
unde sco es he ole o en i onmen al and clima e- ela ed policies in economic unce ain y,
while he Sus ainabili y Wo ld Index (W1SGI) highligh s he in eg a ion o co po a e go e -
nance and clima e s a egies in global economic assessmen s. Finally, he B en c ude oil
p ice (CO1 Comd y) adds a i al commodi y dimension, e lec ing he signi ican impac o
esou ce p ice luc ua ions on La in Ame ican economies, which depend hea ily on na u al
esou ce expo s.
Economies 2025,13, 22 6 o 28
Table 1. Lis o a iables analyzed.
Va iable Label Desc ip ion
EPU Index o B azil EPU_BRA Index C ea ed by Bake e al. (2016) using a icles om Folha de São Paulo.
EPU Index o Chile EPU_CHI Index Cons uc ed by Ce da e al. (2016) based on a icles om El Me cu io
and La Segunda, ollowing Bake e al. (2016).
EPU Index o Colombia EPU_COL Index C ea ed by Gil León and Sil a Pinzón (2019) using El Tiempo da a,
based on Bake e al. (2016).
EPU Index o Mexico EPU_MEX Index
De eloped by Bake e al. (2016) using El No e and Re o ma jou nals.
Global EPU Index GEPU Index
Bake e al. (2016) agg ega ed GDP-weigh ed policy unce ain y om
21 coun ies, no malizing na ional indices and impu ing missing da a,
co e ing 71% o global ou pu .
Vola ili y
Index VIX Index Calcula ed by he CBOE, his “ ea index” measu es ma ke
expec a ions o S&P 500 ola ili y o e 30 days.
Vola ili y
Es ima e Index MOVE Index The ICE Bo A MOVE Index es ima es U.S. T easu y bond ma ke
ola ili y, e lec ing sen imen and isk in in e es a es.
Clima e Policy Unce ain y
Index CPU Index
Ga iilidis (2021) ollows Bake e al. (2016) o cons uc a
clima e- ela ed unce ain y index om eigh U.S. newspape s
(1987–2022), no malized o a mean o 100.
Sus ainabili y Wo ld Index W1SGI Index
The Dow Jones index anks he op 10% sus ainabili y- ocused
companies among he la ges 2500 globally, conside ing clima e
s a egies and co po a e go e nance.
Oil B en p ice CO1 Comd y
(Rb en ) T acks he gene ic i s c ude oil, B en p ice.
Sou ce: compiled by he au ho s using da a om Bloombe g, Bake e al. (2016), Ce da e al. (2016), Gil León and
Sil a Pinzón (2019), and Ga iilidis (2021).
This comp ehensi e a ay o a iables o ms he basis o he wa ele analysis con-
duc ed in his s udy, enabling he examina ion o complex, ime- a ying in e ac ions
be ween EPU and inancial, commodi y, clima e, and isk a iables. The indices p o ide
a ich da ase ha cap u es bo h egional speci ici ies and b oade global ends, making
Table 1an essen ial e e ence poin o unde s anding he me hodological amewo k and
scope o he analysis.
3.2. Wa ele Cohe ence Analysis (WCA)
Wa ele analysis is p esen ed as an essen ial me hodological app oach o s udying
he in ica e ela ionships be ween mac oeconomic a iables in he La in Ame ican con ex .
While adi ional economic s udies o en ely on ime domain analysis o ack a iable
e olu ion o equency domain analysis o ocus on cyclic beha io , wa ele analysis b idges
hese pe spec i es. Magazzino and Mu ascu (2019) highligh ha his dual app oach o e s
a dynamic amewo k o explo e how economic policy unce ain y (EPU) in e ac s wi h
inancial, commodi y, and clima e a iables o e ime and ac oss di e en equencies.
In oduced o applied economics by Ramsey and Lampa (1998), wa ele analysis is
pa icula ly e ec i e o examining non-s a iona y da a, which cha ac e izes he economic
dynamics o La in Ame ican coun ies. I dis inguishes be ween sho - e m luc ua ions,
medium- e m cycles, and long- e m ends, p o iding a g anula iew o how a iables
e ol e ac oss di e en ime ho izons (Ma ín-Rod íguez e al.,2023a,2023b,2024). This
es ablishes i as a c i ical ool o analyzing economic policy unce ain y and i s in e ac ions
wi h La in Ame ica’s inancial, commodi y, clima e, and isk a iables.
Economies 2025,13, 22 7 o 28
3.2.1. Mo le Mo he Wa ele
In his s udy, he Mo le wa ele is employed o analyze he empo al and equency
ela ionships be ween EPU indices and o he mac oeconomic a iables such as inancial,
commodi y, clima e, and isk a iables in La in Ame ica. By using a mo he wa ele ,
small wa es a e gene a ed, which depend on bo h ime (
) and scale (
s
). The ma hema ical
ep esen a ion o he mo he wa ele is gi en by he ollowing:
ψτ,s( )=1
√sψ −τ
s(1)
He e,
τ
se es as a ansla ion pa ame e , and he no maliza ion ac o
1
√s
ensu es
consis ency and compa abili y ac oss a ious scales o e he ime domain.
Va ious wa ele s ha e been p oposed o ime se ies decomposi ion in he li e a u e,
wi h he choice depending on he esea ch ocus. This s udy adop s he Mo le wa ele ,
which is well sui ed o cap u ing bo h he ampli ude and phase in o ma ion o cyclical
pa e ns, as demons a ed in simila analyses (Ma ín-Rod íguez e al.,2023a,2023b,2024).
The Mo le wa ele is no ably ecognized o i s abili y o balance empo al and equency
localiza ion (Addison,2017), and i s Fou ie pe iod is closely aligned wi h he employed
scale (G ins ed e al.,2004). The Mo le wa ele unc ion is de ined as ollows:
ψM( )=1
π1/4 eiω0 e− 2/2 (2)
whe e
ω0
deno es he wa ele ’s cen al equency. Following he me hodologies es ablished
in p e ious s udies (Bou i e al.,2020;Ma ín-Rod íguez e al.,2023a,2023b,2024), his
s udy uses
ω0=
6. This speci ic choice op imizes in o ma ion localiza ion in bo h he ime
and equency domains, ensu ing an accu a e and de ailed analysis o EPU dynamics.
3.2.2. Wa ele Powe Spec um and Wa ele Cohe ence
The con inuous wa ele ans o m (CWT) is u ilized o explo e he e olu ion o ela-
ionships be ween EPU and o he a iables a bo h he na ional and egional le els. The
CWT o a ime se ies x( )wi h a wa ele ψis exp essed as ollows:
Wx;ψ(τ,s)=Z∞
−∞
x( )1
p|s|ψ∗ −τ
sd (3)
whe e
ψ∗
ep esen s he complex conjuga e o he wa ele ,
s
is a scaling ac o , and
τ
is a
ansla ion pa ame e . This ans o m p o ides simul aneous insigh s in o bo h he ime
and equency domains. The wa ele powe spec um (WPS), which measu es he localized
ene gy o he ime se ies, is de ined as ollows:
WPSx(τ,s)=|Wx(τ,s)|2(4)
Wa ele cohe ence is applied o analyze he ela ionship be ween wo a iables in
bo h he ime and equency domains. The c oss-wa ele ans o m o wo ime se ies
x( )
and y( )is de ined as ollows:
Wxy(τ,s)=Wx(τ,s)W∗
y(τ,s)(5)
Economies 2025,13, 22 8 o 28
Wa ele cohe ence, which quan i ies he simila i y be ween he wo ime se ies, is
calcula ed as ollows:
R2
xy(τ,s)=SWxy(τ,s)
2
S|Wxx(τ,s)|2SWyy(τ,s)
2(6)
Phase di e ences be ween he a iables, which p o ide insigh s in o lead–lag ela ion-
ships, a e gi en by he ollowing:
ϕxy(τ,s)=a c anℑWxy(τ,s)
ℜWxy(τ,s),ϕx,y∈[−π,π](7)
The phase di e ence helps de e mine whe he he a iables a e synch onized o
whe he one leads o lags he o he . Fo example, igh wa d a ows in cohe ence plo s
indica e in-phase synch oniza ion wi h no lag, while le wa d a ows signi y ou -o -phase
ela ionships. Upwa d and downwa d a ows e eal he di ec ion o causali y be ween
he a iables.
3.2.3. Ad an ages o Wa ele Analysis o EPU in La in Ame ica
Wa ele analysis is pa icula ly sui ed o s udying economic policy unce ain y in
La in Ame ica due o i s abili y o handle non-s a iona i y, s uc u al b eaks, and cyclical
pa e ns simul aneously. Unlike adi ional me hods, wa ele analysis does no impose
assump ions abou ime ho izons, allowing o a lexible explo a ion o bo h sho - e m
dis up ions and long- e m ends. This makes i ideal o examining how EPU in e ac s
wi h inancial a iables like exchange a es and s ock indices, commodi y p ices such as oil,
and clima e- ela ed isks.
By applying wa ele analysis, his s udy no only cap u es he ime- a ying dynamics
o EPU in La in Ame ica bu also in eg a es hese indings in o b oade global pa e ns, link-
ing local unce ain ies wi h in e na ional inancial and clima e ends. The esul s con ibu e
signi ican ly o unde s anding he complex and e ol ing na u e o economic policy unce -
ain y, pa icula ly in economies wi h high exposu e o poli ical and economic ola ili y.
4. Empi ical Resul s
4.1. Desc ip i e S a is ics and Co ela ion Analysis
This subsec ion p o ides a comp ehensi e s a is ical o e iew o he economic policy
unce ain y (EPU) indices o B azil, Chile, Colombia, and Mexico, alongside selec ed global
inancial and economic indica o s. Key me ics such as mean, a iance, skewness, and
ku osis e eal he di e se cha ac e is ics o EPU indices ac oss La in Ame ica, highligh ing
hei beha io and a iabili y (Table 2). B azil’s EPU index (REPU_BRA) s ands ou wi h
he highes mean (0.124) and a iance (0.361), e lec ing pe sis en ly high and ola ile policy
unce ain y. In con as , Chile (REPU_CHI) exhibi s he lowes mean (0.052) and a iance
(0.095), indica ing a mo e s able policy en i onmen . Colombia (REPU_COL) and Mexico
(REPU_MEX) display in e media e le els o unce ain y, wi h mode a e means (0.057 and
0.095, espec i ely) and a iances (0.14 and 0.242). Kendall co ela ion analysis (Table 3)
complemen s his unde s anding by highligh ing signi ican associa ions be ween domes ic
and global a iables, unde sco ing hei in e connec edness.
The desc ip i e s a is ics in Table 2lay a c ucial ounda ion o he subsequen wa ele
analysis, which will explo e he ime– equency in e ac ions be ween EPU indices and
ex e nal ac o s. By iden i ying key ola ili y, asymme y, and pe sis ence pa e ns, his
s udy p o ides ac ionable insigh s o policymake s o mi iga e unce ain y and enhance
economic s abili y in an inc easingly in e connec ed global economy. Skewness and ku osis
Economies 2025,13, 22 15 o 28
Economies2025,13,xFORPEERREVIEW15o 29




Figu e3.Wa ele cohe enceanalysiso EPUinChileandi sin e ac ionswi hglobal inancial,com-
modi y,andclima e a iables.Sou ce:au ho s’own esea chusingda acompiled ommul iple
sou ces.
Finally,Figu e3 examines hein e ac ionbe weenoilp ices(RBRENT)and
REPU_CHI, e ealingsigni ican cohe encedu ing2010–2013and2017–2022a medium-
andlong- e mscales(16–32and32–64mon hs).Thea ows,poin ingle -up(↖),indica e
ha oilp iceslead ochangesinREPU_CHI.Thisunde sco es hein luenceo globaloil
p icedynamicsonChile’seconomicpolicyunce ain y, e lec ing hecoun y’s eliance
onoilimpo s.Tomi iga e heseeffec s,policymake sshould ocusons abilizingene gy
policiesand educingdependencyonoilimpo s obuffe  heeconomyagains globaloil
p ice luc ua ions.The indingsemphasizeChile’s ulne abili y oex e nalshocksdue o
i s elianceonna u al esou ceexpo sandin eg a ionin oglobalsus ainabili yma ke s.
Tomi iga e isks,policymake sshouldp io i izeeconomicdi e si ica ionand educede-
pendenceonsus ainabili y-d i encommodi ies.
Chile’seconomicpolicyunce ain yisdeeplyin luencedbyglobal inancial,en i on-
men al,andcommodi yma ke s,unde sco ingi s ulne abili y oex e nalshocks.The
coun y’ssensi i i y oglobal ola ili yindices,bondma ke  ends,andeconomicpolicy
unce ain yhighligh s heneed o  obus  inancialsa egua dsand educed elianceon
ex e naldeb and esou ce-basedma ke s.
Mo eo e , heinc easingin luenceo globalsus ainabili yindicesandclima epolicy
unce ain yonChile’sdomes icpolicyen i onmen emphasizes henecessi yo aligning
wi hin e na ionalen i onmen als anda dsandinco po a ingsus ainabili y iskassess-
men sin ona ionalpolicies.Di e si yingi seconomicbaseands abilizingene gypoli-
cies,pa icula ly educingdependencyonoilimpo s,willenhanceChile’s esilience o
globalshocksandposi ioni compe i i elyinsus ainablema ke s.Theses a egiesa e
c i ical o  os e inglong- e meconomics abili yandg ow hina apidlyin e connec ed
globaleconomy.
Figu e 3. Wa ele cohe ence analysis o EPU in Chile and i s in e ac ions wi h global inancial,
commodi y, and clima e a iables. Sou ce: au ho s’ own esea ch using da a compiled om
mul iple sou ces.
Finally, Figu e 3 examines he in e ac ion be ween oil p ices (RBRENT) and
REPU_CHI, e ealing signi ican cohe ence du ing 2010–2013 and 2017–2022 a medium-
and long- e m scales (16–32 and 32–64 mon hs). The a ows, poin ing le -up (
↖
), indica e
ha oil p ices lead o changes in REPU_CHI. This unde sco es he in luence o global oil
p ice dynamics on Chile’s economic policy unce ain y, e lec ing he coun y’s eliance
on oil impo s. To mi iga e hese e ec s, policymake s should ocus on s abilizing ene gy
policies and educing dependency on oil impo s o bu e he economy agains global
oil p ice luc ua ions. The indings emphasize Chile’s ulne abili y o ex e nal shocks
due o i s eliance on na u al esou ce expo s and in eg a ion in o global sus ainabili y
ma ke s. To mi iga e isks, policymake s should p io i ize economic di e si ica ion and
educe dependence on sus ainabili y-d i en commodi ies.
Chile’s economic policy unce ain y is deeply in luenced by global inancial, en i on-
men al, and commodi y ma ke s, unde sco ing i s ulne abili y o ex e nal shocks. The
coun y’s sensi i i y o global ola ili y indices, bond ma ke ends, and economic policy
unce ain y highligh s he need o obus inancial sa egua ds and educed eliance on
ex e nal deb and esou ce-based ma ke s.
Mo eo e , he inc easing in luence o global sus ainabili y indices and clima e policy
unce ain y on Chile’s domes ic policy en i onmen emphasizes he necessi y o aligning
wi h in e na ional en i onmen al s anda ds and inco po a ing sus ainabili y isk assess-
men s in o na ional policies. Di e si ying i s economic base and s abilizing ene gy policies,
pa icula ly educing dependency on oil impo s, will enhance Chile’s esilience o global
shocks and posi ion i compe i i ely in sus ainable ma ke s. These s a egies a e c i -
ical o os e ing long- e m economic s abili y and g ow h in a apidly in e connec ed
global economy.
4.2.3. Colombia
This sec ion examines he dynamic ela ionships be ween Colombia’s Economic Policy
Unce ain y Index (REPU_COL) and a ious ex e nal ac o s. Figu e 4a highligh s he
in e ac ion be ween RVIX (global ma ke ola ili y) and REPU_COL, e ealing signi i-
can cohe ence du ing 2011–2013 and 2019–2021, pa icula ly a medium- e m scales (4–8
and 8–16 mon hs). The a ows p edominan ly poin igh wa d (
→
) and upwa d- igh
(
↗
), indica ing a posi i e causal ela ionship whe e inc eases in REPU_COL con ibu e o
heigh ened RVIX. This inding unde sco es Colombia’s dual ole as bo h a ecipien and
ansmi e o global inancial unce ain y. The obse ed dynamics sugges ha domes ic
economic policy ins abili y no ably in luences global ma ke ola ili y, likely e lec ing
Colombia’s in eg a ion in o in e na ional inancial sys ems. These esul s emphasize he

Economies 2025,13, 22 16 o 28
c i ical need o Colombian policymake s o implemen measu es ha educe domes ic
unce ain y and i s spillo e e ec s on global ma ke s. Enhanced isk managemen , he
di e si ica ion o inancial ins umen s, and alignmen wi h in e na ional s abili y ame-
wo ks a e essen ial s a egies o sa egua d he coun y’s economic en i onmen while
mi iga ing i s global impac .
Figu e 4b examines he ela ionship be ween RMOVE (global bond ma ke ola ili y)
and Colombia’s Economic Policy Unce ain y Index (REPU_COL), e ealing signi ican
cohe ence du ing 2010–2012 and 2015–2017 a sho - and medium- e m scales (0–4,
4–8
,
and 8–16 mon hs) and ex ending o medium- and long- e m scales (8–16, 16–32, and
32–64 mon hs
) in 2019–2022. The a ows, poin ing downwa d- igh (
↘
) and le -up (
↖
),
indica e ha RMOVE nega i ely leads REPU_COL, demons a ing how luc ua ions in
global bond ma ke s closely align wi h and in luence Colombia’s economic policy unce -
ain y. These indings highligh Colombia’s ulne abili y o global bond ma ke ola ili y,
whe e heigh ened luc ua ions exace ba e domes ic policy unce ain y h ough inc eased
bo owing cos s o educed capi al in lows. To add ess his, policymake s should ocus
on managing ex e nal deb , di e si ying unding sou ces, and s eng hening domes ic
inancial ma ke s. Such s a egies a e c ucial o enhance economic esilience and mi iga e
he impac o in e na ional ma ke ins abili y on Colombia’s policy en i onmen .
Simila ly, Figu e 4c highligh s he in e ac ion be ween RGEPU (global economic policy
unce ain y) and REPU_COL (Colombia’s Economic Policy Unce ain y Index), showing
signi ican cohe ence du ing 2010–2012 and 2015–2017 a sho - and medium- e m scales
(0–4, 4–8, and 8–16 mon hs) and ex ending in o medium- and long- e m scales (8–16, 16–32,
and 32–64 mon hs) in 2019–2022. The esul s closely ep esen he pa e ns obse ed be-
ween REPU_COL and RMOVE. The a ows, poin ing downwa d- igh (
↘
) and le -up
(
↖
), sugges ha RGEPU nega i ely in luences REPU_COL, unde sco ing how global eco-
nomic policy unce ain y di ec ly impac s Colombia’s domes ic policy s abili y by aligning
wi h and ampli ying local unce ain y dynamics. These indings emphasize Colombia’s
ulne abili y o global economic policy shi s, wi h ex e nal luc ua ions cascading in o i s
domes ic policy en i onmen . Policymake s mus enhance esilience by adop ing s a egies
ha educe dependency on ola ile ex e nal economic condi ions. This includes aligning
domes ic policies wi h global economic ends, s eng hening ins i u ional amewo ks,
and di e si ying economic s uc u es o mi iga e he ansmission o global unce ain y
in o he na ional con ex .
Economies2025,13,xFORPEERREVIEW17o 29
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Figu e4.Wa ele cohe enceanalysiso EPUinColombiaandi sin e ac ionswi hglobal inancial,
commodi y,andclima e a iables.Sou ce:au ho s’own esea chusingda acompiled ommul i-
plesou ces.
Fu he mo e,Figu e4dillus a es hecohe encebe weenRCPU(clima epolicyun-
ce ain y)andREPU_COL(Colombia’sEconomicPolicyUnce ain yIndex),showingsig-
ni ican  ela ionshipsdu ing2013–2014and2021–2022a sho - e mscales(4–8mon hs).
Addi ionally, om2015 o2022, hecohe enceex ends omedium-andlong- e mscales
(16–32and32–64mon hs).Thea owsp edominan lypoin  igh wa d(→)andupwa d-
igh (↗),indica ingaposi i ecausal ela ionshipinwhichinc easesinREPU_COLam-
pli yRCPU.These indingshighligh  henuanced ela ionshipbe weendomes iceco-
nomicpolicyunce ain y(REPU_COL)andglobalclima epolicyunce ain y(RCPU),
sugges ing ha Colombia’sin e naleconomicdynamicsmays illin luenceb oade cli-
ma e- ela edunce ain ydespi ei s ela i elysmall olein heglobaleconomy.WhileCo-
lombiaisno amajo globalplaye incommodi yexpo s,i s elianceonclima e-sensi i e
sec o ssuchasag icul u e,mining,andhyd oca bonsmeans ha domes iceconomicun-
ce ain ycan aiseques ionsabou i sabili y oimplemen effec i eclima es a egies.
Thiscouldsub lyshi in e na ionalpe cep ions,pa icula lywi hin egionalma ke so 
among adingpa ne s, he ebycon ibu ing oheigh enedglobalclima epolicy
Figu e 4. Con .
Economies 2025,13, 22 17 o 28
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Figu e4.Wa ele cohe enceanalysiso EPUinColombiaandi sin e ac ionswi hglobal inancial,
commodi y,andclima e a iables.Sou ce:au ho s’own esea chusingda acompiled ommul i-
plesou ces.
Fu he mo e,Figu e4dillus a es hecohe encebe weenRCPU(clima epolicyun-
ce ain y)andREPU_COL(Colombia’sEconomicPolicyUnce ain yIndex),showingsig-
ni ican  ela ionshipsdu ing2013–2014and2021–2022a sho - e mscales(4–8mon hs).
Addi ionally, om2015 o2022, hecohe enceex ends omedium-andlong- e mscales
(16–32and32–64mon hs).Thea owsp edominan lypoin  igh wa d(→)andupwa d-
igh (↗),indica ingaposi i ecausal ela ionshipinwhichinc easesinREPU_COLam-
pli yRCPU.These indingshighligh  henuanced ela ionshipbe weendomes iceco-
nomicpolicyunce ain y(REPU_COL)andglobalclima epolicyunce ain y(RCPU),
sugges ing ha Colombia’sin e naleconomicdynamicsmays illin luenceb oade cli-
ma e- ela edunce ain ydespi ei s ela i elysmall olein heglobaleconomy.WhileCo-
lombiaisno amajo globalplaye incommodi yexpo s,i s elianceonclima e-sensi i e
sec o ssuchasag icul u e,mining,andhyd oca bonsmeans ha domes iceconomicun-
ce ain ycan aiseques ionsabou i sabili y oimplemen effec i eclima es a egies.
Thiscouldsub lyshi in e na ionalpe cep ions,pa icula lywi hin egionalma ke so 
among adingpa ne s, he ebycon ibu ing oheigh enedglobalclima epolicy
Figu e 4. Wa ele cohe ence analysis o EPU in Colombia and i s in e ac ions wi h global inan-
cial, commodi y, and clima e a iables. Sou ce: au ho s’ own esea ch using da a compiled om
mul iple sou ces.
Fu he mo e, Figu e 4d illus a es he cohe ence be ween RCPU (clima e policy un-
ce ain y) and REPU_COL (Colombia’s Economic Policy Unce ain y Index), showing
signi ican ela ionships du ing 2013–2014 and 2021–2022 a sho - e m scales (4–8 mon hs).
Addi ionally, om 2015 o 2022, he cohe ence ex ends o medium- and long- e m scales
(
16–32
and 32–64 mon hs). The a ows p edominan ly poin igh wa d (
→
) and upwa d-
igh (
↗
), indica ing a posi i e causal ela ionship in which inc eases in REPU_COL ampli y
RCPU. These indings highligh he nuanced ela ionship be ween domes ic economic pol-
icy unce ain y (REPU_COL) and global clima e policy unce ain y (RCPU), sugges ing
ha Colombia’s in e nal economic dynamics may s ill in luence b oade clima e- ela ed
unce ain y despi e i s ela i ely small ole in he global economy. While Colombia is no a
majo global playe in commodi y expo s, i s eliance on clima e-sensi i e sec o s such as
ag icul u e, mining, and hyd oca bons means ha domes ic economic unce ain y can aise
ques ions abou i s abili y o implemen e ec i e clima e s a egies. This could sub ly shi
in e na ional pe cep ions, pa icula ly wi hin egional ma ke s o among ading pa ne s,
he eby con ibu ing o heigh ened global clima e policy unce ain y. Addi ionally, luc ua-
ions in Colombia’s economic policy en i onmen migh a ec he s abili y o smalle -scale
ade lows in ca bon-sensi i e commodi ies, c ea ing localized lows ha cumula i ely
add o global unce ain ies, especially in in e connec ed ma ke s.
Figu e 4e depic s he ela ionship be ween he Sus ainabili y Wo ld Index (RW1SGI)
and Colombia’s Economic Policy Unce ain y Index (REPU_COL), e ealing signi i-
can cohe ence du ing 2010–2012 and 2019–2021, pa icula ly a medium- e m scales
(8–16 mon hs
). The a ows poin ing downwa d-le (
↙
) indica e a nega i e causal e-
la ionship, whe e changes in RW1SGI d i e luc ua ions in REPU_COL. This sugges s ha
Colombia’s economic policy unce ain y is in luenced by global sus ainabili y ends, e-
lec ing he coun y’s eliance on esou ce-based expo s and i s sensi i i y o in e na ional
ma ke dynamics. These indings emphasize he need o Colombia o align domes ic
Economies 2025,13, 22 18 o 28
policies wi h global sus ainabili y ends o mi iga e ex e nal shocks. P io i izing economic
di e si ica ion and embedding sus ainabili y in o policy amewo ks would enhance e-
silience o ma ke ola ili y and posi ion he coun y o seize oppo uni ies in he global shi
owa d sus ainable de elopmen . This app oach would s eng hen Colombia’s economic
s abili y while bols e ing i s ole in sus ainabili y- ocused in e na ional ma ke s.
Finally, Figu e 4 examines he ela ionship be ween global oil p ices (RBRENT) and
Colombia’s Economic Policy Unce ain y Index (REPU_COL), e ealing signi ican cohe -
ence ac oss mul iple pe iods. Du ing 2010–2014, he upwa d-poin ing a ows (
↑
) sugges
ha REPU_COL leads oil p ices a long- e m scales (16–32 mon hs), indica ing ha domes-
ic policy unce ain y may in luence oil ma ke pe cep ions. In con as , du ing 2016 and
2019–2020, he le -upwa d a ows (
↖
) e eal a nega i e causal ela ionship, wi h oil p ices
exe ing a leading in luence on REPU_COL. Finally, om 2020 o 2022, a medium- e m
scales (16–32 mon hs), le wa d a ows (
←
) indica e nega i e in-phase ela ionships, wi h
some ins ances o REPU_COL leading changes in RBRENT. These indings unde sco e he
pi o al ole o oil p ices in shaping Colombia’s economic policy unce ain y, e lec ing he
sec o ’s impo ance wi hin he coun y’s economic amewo k. They also highligh he
bidi ec ional na u e o his ela ionship, whe e domes ic policy unce ain y can in luence
global oil ma ke dynamics while simul aneously being a ec ed by ex e nal p ice ola ili y.
Add essing hese challenges equi es implemen ing obus ene gy policies, he di e si ica-
ion o he ene gy sec o , and educing dependency on ola ile oil ma ke s. Such measu es
would help mi iga e domes ic economic unce ain y, enhance esilience o global oil p ice
luc ua ions, and p omo e long- e m economic s abili y.
Colombia’s Economic Policy Unce ain y Index (REPU_COL) is in ica ely linked o
global economic and inancial dynamics, as e idenced by i s in e ac ions wi h a iables
such as ma ke ola ili y (RVIX), bond ma ke luc ua ions (RMOVE), global economic
policy unce ain y (RGEPU), clima e policy unce ain y (RCPU), he Sus ainabili y Wo ld
Index (RW1SGI), and oil p ices (RBRENT). These ela ionships, o en cha ac e ized by
medium- e m cycles (8–16 mon hs), highligh Colombia’s ulne abili y o ex e nal shocks
and i s dual ole as bo h a ecipien and ansmi e o global unce ain ies. Despi e i s
ela i ely small scale in global ma ke s, Colombia’s eliance on esou ce-based expo s and
clima e-sensi i e sec o s ampli ies i s suscep ibili y o global ends.
The indings emphasize he need o s a egic policymaking o mi iga e hese ulne a-
bili ies. Economic di e si ica ion is c ucial o educe dependency on oil and commodi y
expo s, while s eng hening domes ic inancial sys ems can bu e agains ex e nal ma ke
ins abili y. Policymake s should also in eg a e clima e isk managemen in o na ional
s a egies o add ess he challenges posed by global sus ainabili y and en i onmen al
ends. These measu es will enhance Colombia’s economic esilience, s abilize i s policy
en i onmen , and posi ion he coun y o capi alize on eme ging oppo uni ies in a globally
in e connec ed and sus ainabili y- ocused economy.
4.2.4. Mexico
This sec ion analyzes he dynamic in e ac ions be ween Mexico’s Economic Policy
Unce ain y Index (REPU_MEX) and a ange o ex e nal a iables. Figu e 5a illus a es sig-
ni ican cohe ence du ing 2010–2012 and 2019–2020, p edominan ly a sho - and medium-
e m scales (0–4, 4–8, and 8–16 mon hs). In 2010–2012, he downwa d- igh a ows (
↘
)
e eal a nega i e causal ela ionship, whe e heigh ened global inancial ma ke ola ili y
in ensi ied domes ic economic policy unce ain y in Mexico. This sugges s ha ex e nal
shocks in global ma ke s signi ican ly d o e domes ic policy ins abili y du ing his pe iod,
unde sco ing Mexico’s sensi i i y o in e na ional inancial u bulence.
Economies 2025,13, 22 19 o 28
Con e sely, in 2019–2020, he upwa d- igh a ows (
↗
) indica e a shi o a posi i e
causal ela ionship, whe e inc eases in REPU_MEX con ibu ed o in ensi ied RVIX. This
e e sal highligh s Mexico’s e ol ing ole as a ecipien and a ansmi e o global inancial
unce ain y. Such dynamics may e lec he g owing in eg a ion o Mexico’s economy
in o in e na ional inancial sys ems o heigh ened global sensi i i y o i s economic policy
luc ua ions du ing domes ic ins abili y pe iods. These indings unde line Mexico’s dual
ulne abili y o and in luence on global ma ke ola ili y. The nega i e causal ela ion-
ship in 2010–2012 emphasizes he need o mechanisms o shield he domes ic economy
om ex e nal shocks, such as di e si ying inancial ins umen s and enhancing egula-
o y amewo ks. The posi i e causali y in 2019–2020 u he s esses he impo ance o
s abilizing domes ic economic policy o mi iga e i s spillo e e ec s on global ma ke s.
S eng hening inancial sa egua ds, aligning wi h in e na ional s abili y amewo ks, and
os e ing economic esilience a e essen ial o ensu ing Mexico’s s abili y and minimizing
i s con ibu ions o global inancial unce ain y.
Figu e 5b e eals a signi ican in e ac ion be ween Mexico’s Economic Policy Unce -
ain y Index (REPU_MEX) and global bond ma ke ola ili y (RMOVE), wi h no able cohe -
ence du ing 2013–2014 and 2020–2022, pa icula ly a medium- e m scales (
8–16 mon hs
).
The p edominance o downwa d- igh a ows (
↘
) indica es a posi i e causal ela ion-
ship, highligh ing how luc ua ions in global bond ma ke s align closely wi h inc eases in
Mexico’s economic policy unce ain y. These indings emphasize Mexico’s eliance on in e -
na ional bond ma ke s, unde sco ing i s ulne abili y o ex e nal inancial shocks. Ele a ed
global bond ma ke ola ili y can inc ease bo owing cos s, educe capi al in lows, and
des abilize domes ic inancial condi ions. To mi iga e hese isks, Mexico mus p io i ize
managing ex e nal deb exposu e by di e si ying unding sou ces and s eng hening i s
domes ic bond ma ke s. Addi ionally, implemen ing obus iscal policies and enhancing
inancial esilience will educe he coun y’s sensi i i y o global bond ma ke dynamics
and ensu e g ea e economic s abili y.
Figu e 5c explo es he ela ionship be ween global economic policy unce ain y
(RGEPU) and REPU_MEX, e ealing signi ican cohe ence du ing 2010–2013, 2016–2017,
and 2020 a sho - and medium- e m scales (0–4, 4–8, and 8–16 mon hs). The downwa d-
igh a ows (
↘
) indica e ha RGEPU nega i ely in luences REPU_MEX, showing ha
global mac oeconomic policy shi s exace ba e domes ic policy unce ain y. These esul s
highligh he in e connec edness o Mexico’s economy wi h in e na ional mac oeconomic
ends and unde sco e he need o adap able domes ic policies o mi iga e isks associa ed
wi h ex e nal economic shi s.
Figu e 5d highligh s he signi ican cohe ence be ween global clima e policy unce -
ain y (RCPU) and Mexico’s Economic Policy Unce ain y Index (REPU_MEX) o e he
en i e pe iod analyzed (2010–2022). This ela ionship is mos p onounced a medium- and
long- e m scales (8–16 and 16–32 mon hs) om 2010 o 2018, wi h cohe ence pe sis ing only
a long- e m scales (16–32 mon hs) om 2019 o 2022. The p edominance o downwa d-
igh a ows (
↘
) indica es a nega i e causal ela ionship, whe e global clima e policy
unce ain ies signi ican ly in luence Mexico’s economic policy en i onmen . These esul s
unde sco e he subs an ial impac o global clima e unce ain ies on Mexico’s economic
policy s abili y, la gely due o he coun y’s eliance on clima e-sensi i e sec o s such as
ene gy and ag icul u e. Global shi s in clima e policy likely dis up domes ic ma ke s and
ampli y policy unce ain y, c ea ing economic ulne abili ies.
Economies 2025,13, 22 20 o 28
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esul sunde sco e hesubs an ialimpac o globalclima eunce ain iesonMexico’seco-
nomicpolicys abili y,la gelydue o hecoun y’s elianceonclima e-sensi i esec o s
suchasene gyandag icul u e.Globalshi sinclima epolicylikelydis up domes ic
ma ke sandampli ypolicyunce ain y,c ea ingeconomic ulne abili ies.



Figu e5.Wa ele cohe enceanalysiso EPUinMexicoandi sin e ac ionswi hglobal inancial,
commodi y,andclima e a iables.Sou ce:au ho s’own esea chusingda acompiled ommul i-
plesou ces.
Toadd ess hesechallenges,Mexicomus p io i izein eg a ingclima e iskconsid-
e a ionsin oi sna ionalpolicy amewo ks.Thisincludes os e ing esiliencewi hincli-
ma e-sensi i eindus ies h oughsus ainablep ac ices,di e si ying heeconomicbase o
educesec o aldependency,andaligningdomes icclima epolicieswi hglobals anda ds.
Thesemeasu eswillhelpmi iga e heeffec so globalclima epolicyunce ain yandpo-
si ionMexicoasap oac i epa icipan in he ansi ion owa damo esus ainableglobal
economy.
Figu e5eanalyzes he ela ionshipbe ween heSus ainabili yWo ldIndex
(RW1SGI)andMexico’sEconomicPolicyUnce ain yIndex(REPU_MEX),showing
Figu e 5. Wa ele cohe ence analysis o EPU in Mexico and i s in e ac ions wi h global inan-
cial, commodi y, and clima e a iables. Sou ce: au ho s’ own esea ch using da a compiled om
mul iple sou ces.
To add ess hese challenges, Mexico mus p io i ize in eg a ing clima e isk consid-
e a ions in o i s na ional policy amewo ks. This includes os e ing esilience wi hin
clima e-sensi i e indus ies h ough sus ainable p ac ices, di e si ying he economic base
o educe sec o al dependency, and aligning domes ic clima e policies wi h global s an-
da ds. These measu es will help mi iga e he e ec s o global clima e policy unce ain y
and posi ion Mexico as a p oac i e pa icipan in he ansi ion owa d a mo e sus ainable
global economy.
Figu e 5e analyzes he ela ionship be ween he Sus ainabili y Wo ld Index (RW1SGI)
and Mexico’s Economic Policy Unce ain y Index (REPU_MEX), showing signi ican cohe -
ence du ing 2010–2011, 2016–2017, and 2019–2020 a sho - e m scales (4–8 mon hs). The
p edominance o downwa d-le (
↙
) a ows indica es a nega i e causal ela ionship, whe e
changes in REPU_MEX in luence he Sus ainabili y Wo ld Index. These esul s sugges ha
luc ua ions in Mexico’s economic policy unce ain y can in luence global sus ainabili y
indices, e lec ing he coun y’s ole in esou ce-dependen indus ies and supply chains.

Economies 2025,13, 22 21 o 28
This may dis up ma ke s abili y in sec o s sensi i e o sus ainabili y ends. Mexico
should educe domes ic policy unce ain y h ough s able egula o y amewo ks and align
economic policies wi h global sus ainabili y goals o mi iga e hese e ec s. Such measu es
would enhance bo h Mexico’s economic esilience and i s con ibu ion o in e na ional
sus ainabili y e o s.
Finally, Figu e 5 analyzes he in e ac ion be ween oil p ices (RBRENT) and Mexico’s
Economic Policy Unce ain y Index (REPU_MEX), e ealing a bidi ec ional ela ionship
wi h signi ican cohe ence, simila o he pa e ns obse ed in Colombia’s ela ionship
wi h oil p ices. Du ing 2010–2017, a long- e m scales (32–64 mon hs), he upwa d- igh
a ows (
↗
) indica e posi i e ela ionships whe e REPU_MEX leads o a change in RBRENT,
sugges ing ha domes ic economic policy unce ain y in Mexico in luenced global oil
p ice dynamics du ing his pe iod. In 2019–2021, a medium- e m scales (8–16 mon hs),
REPU_MEX also led o changes in RBRENT, bu his ime in a nega i e di ec ion, highligh -
ing a shi in he na u e o he in e ac ion. Finally, be ween 2018 and 2022, a long- e m
scales (32–64 mon hs), he le -upwa d a ows (
↖
) indica e a nega i e causal ela ionship,
wi h oil p ices exe ing a leading in luence on REPU_MEX, demons a ing how luc ua ions
in global oil ma ke s inc easingly impac ed Mexico’s economic policy en i onmen .
These indings unde sco e he complex and e ol ing na u e o he ela ionship be-
ween oil p ices and economic policy unce ain y in Mexico. The posi i e causali y obse ed
in ea lie yea s sugges s ha Mexico’s domes ic policy dynamics had a measu able in luence
on global oil p ice ends, possibly h ough i s ole as an oil expo e . Howe e , he la e pe-
iods e eal a e e sal, wi h global oil p ice ola ili y inc easingly shaping Mexico’s policy
unce ain y, e lec ing he coun y’s sensi i i y o ex e nal ene gy ma ke luc ua ions.
Mexico’s economic policy unce ain y demons a es a complex in e play wi h global
inancial, clima e, and commodi y ma ke s, e ealing i s dual ole as bo h a ecipien and
ansmi e o global unce ain y. The cohe ence be ween REPU_MEX and a iables such
as RVIX, RMOVE, and RBRENT highligh s Mexico’s ulne abili y o ex e nal shocks and
i s g owing in eg a ion in o in e na ional ma ke s. The ela ionships wi h sus ainabili y
indices (RW1SGI) and clima e policy unce ain y (RCPU) unde sco e Mexico’s eliance on
esou ce-d i en indus ies and i s exposu e o global en i onmen al shi s. Fluc ua ions in
REPU_MEX dis up global sus ainabili y and clima e indices, emphasizing he need o
s able egula o y amewo ks aligned wi h global sus ainabili y goals.
The bidi ec ional ela ionship wi h oil p ices (RBRENT) e lec s Mexico’s sensi i i y
o global ene gy ma ke s, whe e domes ic policy unce ain y has in luenced global oil
dynamics in ea lie pe iods, while mo e ecen ends show ex e nal oil ma ke ola ili y
shaping Mexico’s economic policy en i onmen . To enhance esilience, Mexico should
p io i ize economic di e si ica ion, educe dependency on esou ce sec o s, and align
domes ic policies wi h global sus ainabili y and inancial amewo ks. These measu es will
mi iga e ex e nal shocks, s abilize he economy, and posi ion Mexico as a p oac i e playe
in global ma ke s.
5. Discussion
5.1. Global Indica o s: VIX, MOVE, and GEPU
This s udy expands upon he exis ing body o knowledge ega ding economic policy
unce ain y (EPU) and i s di e se, ho izon-dependen e ec s on inancial and mac oe-
conomic a iables in La in Ame ica. By aligning wi h global pa e ns while o e ing
egion-speci ic insigh s, he analysis unde sco es how EPU in luences ma ke ola ili y
and economic dynamics ac oss a ying ime ames in conjunc ion wi h indices like VIX,
MOVE, and GEPU. These indings con i m hose o Chen e al. (2024), who emphasize
he dynamic ole o EPU and VIX in shaping ma ke connec edness, whe e sho - and
Economies 2025,13, 22 22 o 28
medium- e m posi i e e ec s ansi ion o nega i e impac s o e he long e m. This
s udy’s e idence o simila ansi ions wi hin La in Ame ican economies ein o ces he
ele ance o hei amewo k.
Addi ionally, he p onounced sensi i i y o eme ging ma ke s, such as B azil, o
global ola ili y indices like RVIX, as highligh ed by Chen (2023), aligns wi h he obse ed
medium- e m cohe ence be ween RVIX and B azil’s EPU. These obse a ions a e suppo ed
by Bou i e al. (2024), who demons a e he in luence o global isk ac o s, such as EPU
and MOVE, on bond ma ke a iance ac oss quan iles, pa icula ly du ing pe iods o
heigh ened unce ain y. The empo al and ho izon-speci ic dependencies iden i ied by
Bou i e al. (2024) closely pa allel his s udy’s indings, pa icula ly in Chile and Colombia.
In hese coun ies, in-phase ela ionships (
→
) e eal a sha ed ulne abili y o global bond
ma ke luc ua ions (RMOVE), e lec ing he alignmen o domes ic unce ain ies wi h
in e na ional inancial ends. Con e sely, B azil and Mexico exhibi dis inc medium- e m
nega i e ela ionships (
↘
) wi h RVIX, highligh ing hei heigh ened exposu e o global
inancial ola ili y and hei di e ing economic sensi i i ies.
Mo eo e , Balcila e al. (2021) emphasize he p edic i e powe o global EPU mea-
su es o eme ging ma ke bond sp eads and ola ili y, pa icula ly unde condi ions o
heigh ened unce ain y. This s udy co obo a es hese indings by e ealing he suscep-
ibili y o La in Ame ican bond ma ke s o ad anced ma ke dynamics. I demons a es
how ele a ed EPU a ac s capi al in lows o high-yield bonds, while pe iods o educed
unce ain y o en igge capi al ou lows due o he pe cep ions o inc eased isk.
Collec i ely, he esul s a i m he cen al ole o EPU and he associa ed global indices
as he key d i e s o economic and inancial ola ili y. They emphasize he need o
ailo ed, egion-speci ic s a egies in La in Ame ica o mi iga e isks and enhance esilience,
pa icula ly in he con ex o global in e dependencies. By o e ing g anula insigh s in o
he in e ac ions be ween unce ain y indices and egional economies, his s udy con ibu es
meaning ully o he b oade discou se on global economic s abili y. This s udy p o ides
ac ionable guidance o policymake s and in es o s o na iga e unce ain y e ec i ely,
balance ex e nal dependencies, and enhance domes ic inancial sys ems’ obus ness.
5.2. Clima e Unce ain ies and Sus ainabili y T ends: CPU and Sus ainabili y Index
This s udy ad ances he unde s anding o economic policy unce ain y (EPU) and
clima e policy unce ain y (CPU) by highligh ing hei mul i ace ed impac s on inancial
ma ke s, commodi y dynamics, and en i onmen al sus ainabili y in La in Ame ica. The
indings pa allel hose o Ghani e al. (2024), who unde sco e CPU’s in luence on enewable
ene gy and anspo a ion indices, emphasizing he need o in eg a e CPU conside a ions
in o economic s a egies o s abilize clima e-sensi i e sec o s. Simila ly, Liu e al. (2024)
e eal he empo al complexi ies o EPU and CPU in oil ma ke s, esona ing wi h his
s udy’s iden i ica ion o sho - e m dep essi e e ec s and medium- o long- e m s imula ion
in commodi y-dependen economies in La in Ame ica.
These pa e ns align wi h hose iden i ied by Dong e al. (2024), who analyze he
nega i e e ec s o CPU and EPU on g een inancial asse s, ein o cing his s udy’s indings
on he nuanced in e ac ions be ween unce ain y indices and g een bonds in he egion.
Wang e al. (2024) u he illus a e s ong p edic i e ela ionships be ween CPU, EPU,
and g een inance in China, mi o ing he impo ance o hedging s a egies and po olio
di e si ica ion using g een asse s obse ed in his s udy. These insigh s emphasize he ole
o g een inance in bu e ing agains unce ain y and enhancing economic s abili y.
The exace ba ion o en i onmen al deg ada ion unde high-EPU condi ions, as shown
by Owusu e al. (2024), complemen s his s udy’s emphasis on he c i ical ole o consis en
policies in mi iga ing ecological ins abili y. Simila ly, H. Li e al. (2024) iden i y EPU
Economies 2025,13, 22 23 o 28
as a d i e o inc eased non- enewable ene gy use and i s associa ed ecological impac s
in BRICS na ions, aligning wi h his s udy’s indings on La in Ame ica’s en i onmen al
ulne abili y. This ein o ces he need o a ge ed s a egies o ansi ion away om
non- enewable ene gy sou ces in he egion.
Fu he , Qu eshi e al. (2024) highligh how i ms adap o high EPU by enhancing
social engagemen o educe unce ain y, a beha io also obse ed among La in Ame ican
i ms in his s udy. Guo e al. (2020) emphasize he mode a ing e ec s o enewable ene gy
policies on en i onmen al deg ada ion, unde sco ing his s udy’s call o s onge egional
enewable ene gy ini ia i es. Meanwhile, Liao e al. (2019) demons a e he impo ance o
in e nal con ols in enhancing co po a e esilience unde high EPU, pa alleling his s udy’s
emphasis on obus go e nance and s akeholde engagemen in unce ain en i onmen s.
In conclusion, his s udy unde sco es he pi o al oles o EPU and CPU in shaping
inancial ma ke s, commodi y dynamics, en i onmen al sus ainabili y, and co po a e s a e-
gies. Fo La in Ame ica, he indings emphasize he u gency o in eg a ing economic
and clima e policies o bols e esilience, p omo e sus ainable de elopmen , and add ess
en i onmen al ulne abili ies. Balancing global in e dependencies wi h local p io i ies
allows he egion o na iga e unce ain y while os e ing long- e m s abili y and g ow h.
5.3. Oil P ices: B en
The dynamic ela ionship be ween oil p ices and economic policy unce ain y (EPU)
e eals signi ican asymme ies and ime-dependen in e ac ions, unde sco ing he c i ical
ole o global ene gy ma ke s in shaping economic policy s abili y. Y. Le e al. (2024)
emphasize ha luc ua ions in c ude oil p ices ac as a key d i e o EPU, wi h ola ili y in
global oil ma ke s exace ba ing economic policy ins abili y, pa icula ly in oil-dependen
economies. This aligns wi h Dash and Mai a (2021), who obse e ha oil p ices and EPU
o en exhibi co-mo emen du ing pe iods o economic u moil, such as inancial c ises,
highligh ing he heigh ened sensi i i y o EPU o dis up ions in ene gy ma ke s.
Mish a e al. (2024) u he explo e his in e play, demons a ing ha oil p ice shocks
con ibu e o in es o pessimism, educe co po a e in es men s, and ampli y policy un-
ce ain y. This e ec is pa icula ly p onounced in esou ce-dependen economies, whe e
iscal amewo ks and economic s abili y a e closely ied o oil e enue. Simila ly, Liu e al.
(2024) in es iga e he equency-dependen e ec s o oil p ices on EPU, no ing ha while
high oil p ices may dampen sho - e m ma ke con idence, hey can s abilize medium- e m
EPU unde a o able condi ions. This duali y e lec s he complex and o en con adic o y
na u e o oil p ice ola ili y’s impac on economic policy esponses.
Ad anced me hodological app oaches, such as hose employed by Isah e al. (2024),
p o ide u he e idence o he empo al and s uc u al dependencies in he oil p ice–EPU
ela ionship. Posi i e oil p ice shocks a e shown o alle ia e EPU in ne -expo ing coun ies,
as inc eased e enue bols e s iscal s abili y. Con e sely, ne -impo ing na ions expe ience
heigh ened unce ain y due o ising impo cos s and in la iona y p essu es, wi h hese
e ec s being pa icula ly acu e in de eloping and eme ging economies. These indings
highligh he di e gen ou comes o oil p ice ola ili y based on a coun y’s economic
s uc u e and eliance on ene gy impo s o expo s.
The asymme ic na u e o he oil p ice–EPU ela ionship is u he highligh ed by
Aime and Lus a (2022), who demons a e ha nega i e oil p ice shocks end o inc ease
EPU mo e signi ican ly han posi i e shocks. This asymme y is obse ed ac oss bo h
sho - and long- e m ho izons, unde sco ing he ulne abili y o economic policy s abili y
o down u ns in ene gy ma ke s. Such asymme ies highligh he need o obus and
adap i e ene gy policies o bu e agains ad e se e ec s while le e aging a o able oil
p ice condi ions.
Economies 2025,13, 22 24 o 28
In summa y, he indings ein o ce he in ica e and bidi ec ional ela ionship be ween
oil p ices and EPU, wi h p o ound implica ions o policymake s na iga ing he ola il-
i y o global ene gy ma ke s. Fo esou ce-dependen economies in La in Ame ica, his
ela ionship unde sco es he impo ance o di e si ying economic s uc u es, s abilizing
ene gy policies, and implemen ing iscal measu es ha educe eliance on oil e enues.
By add essing hese ulne abili ies, policymake s can mi iga e he cascading e ec s o oil
p ice luc ua ions on economic policy unce ain y and enhance long- e m s abili y.
6. Conclusions
This s udy unde sco es he in ica e in e play be ween economic policy unce ain y
(EPU) in key La in Ame ican economies—B azil, Chile, Colombia, and Mexico—and
ex e nal global o ces, including inancial ma ke ola ili y, global policy shi s, clima e
unce ain ies, sus ainabili y ends, and commodi y p ice dynamics. Th ough wa ele
cohe ence analysis, he indings illumina e how hese ela ionships a y ac oss sho - e m
(ST), medium- e m (MT), and long- e m (LT) ho izons, p o iding a g anula pe spec i e
on he d i e s o domes ic policy unce ain y in he egion.
As demons a ed by RVIX and RMOVE, global inancial ins abili y signi ican ly in lu-
ences EPU in all ou coun ies, pa icula ly du ing pe iods o heigh ened global u bulence,
such as 2014–2016 and 2018–2020. The esul s highligh ha sho - and medium- e m cycles
(4–16 mon hs) domina e hese in e ac ions, emphasizing he pe sis en e ec s o ex e nal
shocks on domes ic policy en i onmen s. The indings align wi h hose o Y. Le e al. (2024)
and Isah e al. (2024), who emphasize he ime-dependen impac o inancial ola ili y on
eme ging ma ke s. Simila ly, global economic policy shi s (RGEPU) exace ba e domes ic
policy unce ain y, unde sco ing he in e connec edness o La in Ame ican economies wi h
in e na ional mac oeconomic ends. This unde lines domes ic policies’ need o align wi h
global de elopmen s, enhancing esilience and s abili y.
Clima e- ela ed isks (RCPU) eme ge as a c i ical ac o , pa icula ly o coun ies
like B azil and Colombia, whe e clima e-sensi i e sec o s such as ag icul u e, mining, and
ene gy o m a signi ican pa o he economy. This inding was con i med by Owusu
e al. (2024) and H. Li e al. (2024), who highligh he ulne abili y o such sec o s o
en i onmen al unce ain ies. In eg a ing clima e isk managemen in o na ional policy
amewo ks is i al o sa egua d c i ical indus ies and p omo e long- e m economic s abil-
i y. Simila ly, he hea y eliance on commodi y and oil ma ke s, exempli ied by RBRENT,
u he exace ba es policy unce ain y ac oss he egion, necessi a ing he s abiliza ion o
ene gy policies and economic di e si ica ion.
Global sus ainabili y ends, ep esen ed by RW1SGI, align closely wi h EPU in B azil,
Chile, and Mexico, illus a ing he sensi i i y o hese economies o shi s in sus ainabili y-
d i en ma ke s. This p esen s bo h challenges and oppo uni ies, as hese coun ies can
le e age global ansi ions owa d sus ainabili y by in eg a ing en i onmen al conside -
a ions in o economic s a egies, educing unce ain y, and posi ioning hemsel es as key
playe s in eme ging g een ma ke s.
6.1. Policy Implica ions
Economic di e si ica ion is pa amoun ac oss all coun ies o educe eliance on
ola ile global commodi y and ene gy ma ke s, mi iga ing he ansmission o ex e nal
shocks in o domes ic policy en i onmen s. Such di e si ica ion is necessa y o mi iga e
he ansmission o ex e nal shocks in o domes ic policy en i onmen s. S eng hening
iscal and mone a y amewo ks is equally essen ial, enabling policymake s o abso b he
impac s o inancial ola ili y and economic policy shi s. P oac i ely moni o ing global