Effects of economic policy uncertainty

Rónaiová, Alexandra

The purpose of this master thesis is to empirically analyse the impact of the Economic Policy Uncertainty (EPU) Index during the observed period of 2004-2018. There is examined the long and short runs impact of EPU on the selected macroeconomic variables within four countries which dispones with major trading currencies. These variables, which are used across regression, include stock market returns, interbank rates, effective exchange rates and spreads between long-term government bonds and short-term interbank rates. We applied the VECM as all the variables were found under Johansen test to be integrated of order one I (I). Moreover we also applied the IRF of VAR in accordance with the research of creators of EPU index. The results implies the association between EPU and selected variables and its explicit impact on the development of these variables in case of shock in uncertainty.

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