COVID-19 Induced Economic Uncertainty: A Comparison between the United Kingdom and the United States

TL;DR

This study analyzes how COVID-19 case and death increases within and outside the US and UK influence economic policy uncertainty, revealing country-specific long-term effects and significant short-term uncertainty impacts.

Contribution

It employs bootstrap ARDL cointegration to compare COVID-19's impact on economic uncertainty in the US and UK, highlighting differential effects and external factors.

Findings

US more affected by internal COVID-19 cases

UK more impacted by external COVID-19 deaths

COVID-19 causes significant short-term uncertainty in both countries

Abstract

The purpose of this study is to investigate the effects of the COVID-19 pandemic on economic policy uncertainty in the US and the UK. The impact of the increase in COVID-19 cases and deaths in the country, and the increase in the number of cases and deaths outside the country may vary. To examine this, the study employs bootstrap ARDL cointegration approach from March 8, 2020 to May 24, 2020. According to the bootstrap ARDL results, a long-run equilibrium relationship is confirmed for five out of the 10 models. The long-term coefficients obtained from the ARDL models suggest that an increase in COVID-19 cases and deaths outside of the UK and the US has a significant effect on economic policy uncertainty. The US is more affected by the increase in the number of COVID-19 cases. The UK, on the other hand, is more negatively affected by the increase in the number of COVID-19 deaths outside the country than the increase in the number of cases. Moreover, another important finding from the study demonstrates that COVID-19 is a factor of great uncertainty for both countries in the short-term.