The effect of international economic policy uncertainty on Latin American financial markets

The aim of this study is to analyze the relationship between Latin American financial markets and the economic policy uncertainty index of the United States and China through Wavelet coherence. The results confirm the existence of a comovement relationship between Latin market returns and this index. Furthermore, it was identified a negative correlation led by it on market returns, among which the EPU of United States on Mexico and Colombia in the short and medium term, and EPU of China on Brazil and Peru in the medium term stand out. This evidences a heterogeneous effect of the relationship between financial markets and the EPU. The findings provide relevant information for decision making regarding the uncertainty caused by large international economies.