This study
investigates the average macroeconomic effects of Economic Policy Uncertainty
(EPU) across a group of OECD countries. Although EPU has been extensively
studied in recent years, research focusing on its “average” impact at a
multi-country level remains relatively scarce. To address this gap, I employ a
Panel Vector Auto-Regressive (Panel-VAR) model using data from 14 OECD member
nations, selected based on data availability. The findings indicate that a one
standard deviation increase in the EPU index generally leads to declines in
consumer and business confidence, along with slower economic growth. In contrast,
inflation tends to rise following an EPU shock. Investment responses are more
volatile, showing fluctuations around the mean for up to eight quarters. These
results emphasize the considerable macroeconomic consequences of heightened
policy uncertainty across advanced economies.
