Economic Policy Uncertainty (EPU) and its predictability: a systematic literature review

Joel Raj Francis and Chia, Ricky Chee Jiun (2024) Economic Policy Uncertainty (EPU) and its predictability: a systematic literature review. Global Business and Management Research: An International Journal, 16 (1). pp. 16-36.

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Abstract

Purpose: The main purpose of this paper is to determine the current trend of studies conducted on the predictive power of Economic Policy Uncertainty (EPU) on financial markets. Design/methodology/approach: This study was led via a Systematic Literature Review (SLR) by the PRISMA Statement (Preferred Reporting Items for Systematic Review and MetaAnalyses). The PRISMA Statement is guided by three steps: 1) establishing specific research questions to conduct systematic research, 2) Determine the criteria for inclusion and exclusion, and 3) analysing large databases of scientific literature in a specific time frame. Research articles between 2016 and 2020 were gathered based on the selected keywords and inclusion criteria. Findings: The result of the study indicates that EPU can potentially be used to forecast the returns and volatility of financial markets. However, there are several areas that are currently understudied and needs further validations, for instance, the financial markets in the emerging economies. Research limitations/implications: This paper identifies the gaps in the research on Economic Policy Uncertainty and Financial Markets by conducting a comprehensive systematic literature review. Practical Implications: The findings of this study are likely to have ramifications for investors and policy makers in terms of using EPU index to add value to investments as well as manage risk effectively. Originality/value: To the best of author’s knowledge, little effort has been devoted to systematising the literature on the predictability of economic policy uncertainty on financial markets, hence, this gap is bridged by the research.

Item Type:	Article
Keyword:	Economic Policy Uncertainty, Predictability, Financial Markets Uncertainty, Forecast, PRISMA, Systematic Literature Review
Subjects:	H Social Sciences > HB Economic theory. Demography > HB1-3840 Economic theory. Demography H Social Sciences > HF Commerce > HF1-6182 Commerce > HF5001-6182 Business
Department:	FACULTY > Labuan Faculty of International Finance
Depositing User:	SITI AZIZAH BINTI IDRIS -
Date Deposited:	09 Apr 2025 09:47
Last Modified:	09 Apr 2025 09:47
URI:	https://eprints.ums.edu.my/id/eprint/43427

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