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The Impact of Policy Uncertainty on Macro Variables – An SVAR-Based Empirical Analysis for EU Countries

Author

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  • Kronen Dominik

    (Macroeconomics, Universität Duisburg-Essen, Berliner Platz 6-8, 45127Essen, Germany)

  • Belke Ansgar

    (Macroeconomics, CEPS Brussels and IZA Bonn, Universität Duisburg-Essen, Berliner Platz 6-8, 45127Essen, Germany)

Abstract

In light of the rising political and economic uncertainty in Europe, we aim to provide a basic understanding of the impact of policy and stock market uncertainty on a set of macroeconomic variables such as production and investment. In this paper, we apply a structural vector autoregressive (SVAR) model to gain first insights that may help to identify avenues for further research. We find that stock market volatility shows a fairly consistently negative effect. However, the implications of policy uncertainty for Europe and the euro area in particular are not so straightforward.

Suggested Citation

  • Kronen Dominik & Belke Ansgar, 2017. "The Impact of Policy Uncertainty on Macro Variables – An SVAR-Based Empirical Analysis for EU Countries," Review of Economics, De Gruyter, vol. 68(2), pages 93-116, August.
    • Handle: RePEc:lus:reveco:v:68:y:2017:i:2:p:93-116:n:4
    DOI: 10.1515/roe-2017-0014
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    More about this item

    Keywords

    macroeconomic performance under uncertainty; political uncertainty; financial uncertainty; option value of waiting; structural vector autoregression;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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