Of votes and viruses: the UK economy and economic policy uncertainty

Ellington, Michael, Michalski, Marcin ORCID: 0000-0003-4217-6154 and Milas, Costas ORCID: 0000-0002-9789-384X (2023) Of votes and viruses: the UK economy and economic policy uncertainty. EUROPEAN JOURNAL OF FINANCE, 29 (16). pp. 1849-1865.

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Official URL: http://dx.doi.org/10.1080/1351847x.2022.2083978

Abstract

This paper examines the relation between GDP growth, Divisia money growth, CPI inflation, financial stress, and the UK's economic policy uncertainty in the context of its departure from the European Union. We employ two Bayesian VAR models which account for the extreme observations in macroeconomic and financial time series resulting from the COVID-19 pandemic outbreak. We document a contractionary effect of an economic policy uncertainty shock on GDP growth, which is not present in a model which does not account for the COVID-19-related outliers. Additionally, we find that GDP growth is enhanced by Divisia monetary stimulus but hampered by increases in financial stress. The results from a stochastic volatility in the mean threshold model also uncover different dynamics of transmission of shocks between economic uncertainty and the indicators we study across high and low economic policy uncertainty regimes.

Item Type:	Article
Uncontrolled Keywords:	Brexit, COVID-19, economic policy uncertainty, VAR models
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	07 Jun 2022 09:55
Last Modified:	04 Oct 2023 17:55
DOI:	10.1080/1351847X.2022.2083978
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3155986