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

Author

Listed:
  • Joseph Chukwudi Odionye

    (Department of Economics, Abia State University, Uturu, Nigeria)

  • Ethelbert Ukachukwu Ojiaku

    (Department of Economics, Abia State University, Uturu, Nigeria)

  • Godwin Chigozie Okpara

    (��Department of Banking and Finance, 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)

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.

Suggested Citation

  • Joseph Chukwudi Odionye & Ethelbert Ukachukwu Ojiaku & Godwin Chigozie Okpara & Ndubuisi Agoh & Roy M. Okpara, 2024. "Economic Policy Uncertainty and Stock Market Index: Fresh Insights from Augmented-ARDL and Multiple Structural Breaks," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 15(02), pages 1-24, June.
  • Handle: RePEc:wsi:jicepx:v:15:y:2024:i:02:n:s1793993324500108
    DOI: 10.1142/S1793993324500108
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    More about this item

    Keywords

    Stock market index; EPU; CS-ARDL; multiple structural breaks in panel; SSA;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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