Economic Policy Uncertainty: Persistence and Cross-Country Linkages

27 Pages Posted: 20 May 2020

See all articles by Emmanuel Joel Aikins Abakah

Emmanuel Joel Aikins Abakah

affiliation not provided to SSRN

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Luis A. Gil-Alana

University of Navarra - Department of Economics

Date Written: 2020

Abstract

This paper provides new evidence on the stochastic behaviour of the EPU (Economic Policy Uncertainty (EPU) index constructed by Baker et al. (2016) in six of the biggest economies (Canada, France, Japan, US, Ireland, and Sweden) over the period from January 1985 to October 2019. In particular, it uses fractional integration methods to shed light on its degree of persistence, and also carries out appropriate break tests. Further, the possible co-movement of this index between countries is examined applying a fractional cointegration method which tests for the possible existence of a long-run equilibrium relationship linking the individual indices. EPU is found to be in most cases a non-stationary, mean-reverting series which is characterised by long memory. Several breaks are also detected in each country. Finally, there is very little evidence of cross-country linkages.

Keywords: economic policy uncertainty, persistence, long memory, fractional integration, fractional cointegration.

JEL Classification: C150, C320, C510, C520, E600

Suggested Citation

Aikins Abakah, Emmanuel Joel and Caporale, Guglielmo Maria and Gil-Alana, Luis A., Economic Policy Uncertainty: Persistence and Cross-Country Linkages (2020). CESifo Working Paper No. 8289, Available at SSRN: https://ssrn.com/abstract=3603846

Emmanuel Joel Aikins Abakah (Contact Author)

affiliation not provided to SSRN

No Address Available

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Marie Jahoda Building
Uxbridge, Middlesex UB8 3PH
United Kingdom
+44 1895 266713 (Phone)
+44 1895 269770 (Fax)

HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

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