Economics at your fingertips  

Economic Policy Uncertainty in the Euro Area: Cross-Country Spillovers and Macroeconomic Impact

Volker Clausen, Schlösser Alexander () and Christopher Thiem
Additional contact information
Schlösser Alexander: International Economics, Universitat Duisburg Essen Fachgebiet Volkswirtschaftslehre, Universitätsstraße 12, Essen 45117, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2019, vol. 239, issue 5-6, 957-981

Abstract: This paper analyzes spillovers and the macroeconomic effects of economic policy uncertainty (EPU) in Europe over the last two decades. Drawing on the newspaper-based uncertainty indices by Baker et al. (2016, Measuring Economic Policy Uncertainty. Quarterly Journal of Economics 131 (4): 1593–1636), we first use the Diebold and Yilmaz (2014 On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms. Journal of Econometrics 182 (1): 119–134) connectedness index methodology to investigate the static and dynamic patterns of EPU spillovers. We find substantial spillovers across the European countries. Over time, Germany in particular has become increasingly connected to the other economies. In a second step, we investigate the economic impact of EPU shocks using a structural VAR. The detrimental influence of uncertainty turns out to be regime-dependent. We identify a pre-crisis, a crisis and a post-crisis regime, and the effect is only significant in the former two. Finally, the impact of EPU shocks is also heterogeneous across the monetary union’s most important members.

Keywords: economic policy uncertainty; network connectedness; spillovers; variance decomposition; rolling sample VARs; time-varying parameter VARs (search for similar items in EconPapers)
JEL-codes: D80 E32 F45 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

DOI: 10.1515/jbnst-2018-0083

Access Statistics for this article

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) is currently edited by Peter Winker

More articles in Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) from De Gruyter
Bibliographic data for series maintained by Peter Golla ().

Page updated 2022-04-07
Handle: RePEc:jns:jbstat:v:239:y:2019:i:5-6:p:957-981:n:3