The global economic policy uncertainty spillover analysis: In the background of COVID-19 pandemic.

ABSTRACT

Combining the spillover index approach and LASSO-VAR method, we construct the spillover network of 19 specific countries' economic policy uncertainty (EPU). Then we deconstruct the constructed network into four blocks by the block models, the impacts of COVID-19 on EPU spillover effects between each country and blocks is analyzed gradually. The results reveal that (1) The transnational contagion of EPU is significant, and the spillover network of policy uncertainty is time-varying. (2) EPU networks can be divided into four different blocks by block models. The role of blocks and the spatial spillover transmission path between blocks are different in different periods. (3) The new infection cases and deaths of COVID-19 have a significant effect on reception and transmission directional EPU spillovers, while there is no significant impact on net spillovers. The international movement restrictions during the period of COVID-19 significantly increase the directional and net EPU spillovers. Our findings have some implications for policy-makers and market regulators in the context of the COVID-19 pandemic.