Twelfth Global Studies Conference

Abstract

We provide empirical evidence that changes in the level of the freedom of the press have a substantial impact on risk measures. Using data from the Freedom of the Press annual report to capture how freely the news media can operate, we investigate how changes in the freedom of the press impact financial market volatility and the economic policy uncertainty index. We provide the analysis for eight of the OECD countries (Australia, Canada, France, Germany, Great Britain, Korea, Japan, and the United States of America) and the BRIC countries (Brazil, Russia, India, and China). Our results indicate that the BRIC measurements of risk are more sensitive to changes in the environment in which the media operates than their OECD counterparts. Surprisingly, the effect of the freedom of the press shocks on the economic policy uncertainty index is the opposite of the financial markets volatility, providing further evidence that both measures of risk capture different dimensions of uncertainty. In addition, we provide evidence that the freedom of the press deteriorates during economic recessions relative to economic expansions.