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Economic policy uncertainty in G7 countries: evidence of long-range dependence and cointegration

Author

Listed:
  • OlaOluwa S. Yaya

    (University of Ibadan & Centre for Econometric and Allied Research, University of Ibadan)

  • Nurudeen Abu

    (Umaru Musa Yar’adua University)

  • Tayo P. Ogundunmade

    (University of Ibadan & Centre for Econometric and Allied Research, University of Ibadan)

Abstract

The global financial crisis which emanated from the USA has led to the development of indices for economic policy uncertainty for some developed and developing nations. Also, the current Brexit debate in the UK is a major economic influencer. ‘News of news’ or ‘news of no News’ in the daily newspapers in the USA and UK causes global economic uncertainty which has an aftermath reaction on the global economy. This study considers economic uncertainties in G7 countries using economic policy uncertainty indices developed majorly from newspapers information. The long-range dependence technique in time series was first carried out, and the results reveal an evidence of time series persistence for each country’s index. This provided justification for the adoption of cointegration in a fractional integration set-up using the fractional cointegrating vector autoregressive model recently proposed. The long-run equilibrium results obtained showed that the USA and UK are dominant drivers of economic uncertainty among the G7 countries.

Suggested Citation

  • OlaOluwa S. Yaya & Nurudeen Abu & Tayo P. Ogundunmade, 2021. "Economic policy uncertainty in G7 countries: evidence of long-range dependence and cointegration," Economic Change and Restructuring, Springer, vol. 54(2), pages 541-556, May.
    • Handle: RePEc:kap:ecopln:v:54:y:2021:i:2:d:10.1007_s10644-020-09288-3
    DOI: 10.1007/s10644-020-09288-3
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    1. Kishwar Ali & Hu Hongbing & Chee Yoong Liew & Du Jianguo, 2023. "Governance perspective and the effect of economic policy uncertainty on financial stability: evidence from developed and developing economies," Economic Change and Restructuring, Springer, vol. 56(3), pages 1971-2002, June.

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    More about this item

    Keywords

    G7 countries; Economy; Uncertainty index; Long-range dependence; FCVAR;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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