Economic Policy Uncertainty and Stock Market Index: Fresh Insights from Augmented-ARDL and Multiple Structural Breaks

Joseph Chukwudi Odionye, Ethelbert Ukachukwu Ojiaku (), Godwin Okpara, Ndubuisi Agoh () and Roy M. Okpara ()
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Joseph Chukwudi Odionye: Department of Economics, Abia State University, Uturu, Nigeria
Ethelbert Ukachukwu Ojiaku: Department of Economics, Abia State University, Uturu, Nigeria
Ndubuisi Agoh: ��Department of Banking and Finance, Abia State University, Uturu, Nigeria
Roy M. Okpara: Department of Economics, Abia State University, Uturu, Nigeria

Journal of International Commerce, Economics and Policy (JICEP), 2024, vol. 15, issue 02, 1-24

Abstract: This study provides unique insights into the link between economic policy uncertainty (EPU) and stock market index in Sub-Saharan African (SSA) countries. Basically, the dearth of evidence in this perspective, especially in the context of SSA motivates this new assessment. Thus, on account of the monthly longitudinal series for 11 SSA countries over 2014M1–2023M6, the novel multiple structural break test in panel (MSBP) and cross-sectional ARDL (CS-ARDL) provide the following upshots: first, the high level of EPU worsens the region’s stock index in the short run; second, there is a long-term negative but insignificant effect of EPU on the stock index; third, EPU significantly reduces the stock index in the three identified structural break regimes, but outside it, it is insignificant; fourth, the devastating influence of EPU on stock prices is more pronounced during the COVID-19 era demonstrating that the response of the region’s stock market to EPU is highly sensitive to global shocks. The policy implication from the major findings is for the government authorities to put up plans that can strengthen the stock markets’ resilience to economic policy-induced uncertainty.

Keywords: Stock market index; EPU; CS-ARDL; multiple structural breaks in panel; SSA (search for similar items in EconPapers)
JEL-codes: C23 F41 G01 G15 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S1793993324500108

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