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Dour Hour: The Effects of Policy Uncertainty on Investment Rates in Europe
Wang, Stanley
Wang, Stanley
Abstract
When governments decide to impose policy changes, they cause uncertainty over future policy changes. This uncertainty may, in turn, prevent realization of policy goals. This paper analyzes the effect of policy uncertainty on investment across countries and industries. Specifically, it considers 15 private industry categories (A-N,R in the NACE classification system) across 6 European countries. Results are structured in three parts. The first investigates and compares relationships between Economic Policy Uncertainty (EPU) at the aggregate level across countries. Next, it tries to identify patterns in the Investment Rate responses across industries for each country. Finally, it considers the prevalence of patterns in responses for each industry. The overall pattern seems to be insignificance in the relationship between policy uncertainty and investment rates.. However, for most countries, between one-third to one-half of industries appear to be significantly affected by policy uncertainty. Moreover, both the pattern of results and specific significant industries vary by country.
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2023-04-01
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Economics