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Uncertainty over economic policy plays a key role in economic outcomes. But evidence and quantification for emerging markets are elusive because of measurement and reverse causality issues. In this paper, we construct a news-based economic policy uncertainty (EPU) index for Turkey and assess how it affects Turkish firms. To disentangle the issues of endogeneity and reverse causality, we use a difference-in-differences approach, exploiting the fact that firms with a high share of irreversible investment are more exposed to policy uncertainty. In sectors with large irreversible investment EPU has a greater effect on growth, investment, and leverage. The results are robust to different definitions of investment irreversibility, lag structure, and selection of sectors.

Turkey --- Economic policy. --- Labor --- Macroeconomics --- Money and Monetary Policy --- Information, Knowledge, and Uncertainty: General --- Investment --- Capital --- Intangible Capital --- Capacity --- General Outlook and Conditions --- Firm Objectives, Organization, and Behavior: General --- Personnel Economics: Firm Employment Decisions --- Promotions --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Forecasting and Simulation: Models and Applications --- Labour --- income economics --- Monetary economics --- Economic Forecasting --- Credit default swap --- GDP forecasting --- Money --- National accounts --- Economic theory --- Credit --- National income