Government-sourced economic policy uncertainty and firm performance: evidence from textual analysis and alternative instruments in Vietnam

This paper examines how a government-sourced categorical measure of economic policy uncertainty affects listed firms in Vietnam. Using a new textual index of monetary policy uncertainty (MPU) and fiscal policy uncertainty (FPU) from official and media sources, we show that both dimensions significantly reduce firm performance. To address endogeneity, we propose two novel instruments, storm-related deaths and annual changes in Politburo membership, which serve as instrumental variables for policy uncertainty. Further analysis reveals that firms with Tobin’s Q above one can hedge MPU’s negative effects, but no such mechanism is observed for FPU.