The Impact of Covid-19 and Crude Oil Price on Economic Policy Uncertainty; Evidence from an Emerging Market Economy

Year 2021, Issue: 115, 103 - 118, 13.04.2021

Umut Burak Geyikci

Abstract

This study measured the short-run and long-run effects of Covid-19 on economic policy uncertainty (EPU) using daily data from 04.04.2020 to 16.09.2020 and the Autoregressive Distributed Lag (ARDL) model. In addition, the impact of crude oil price on EPU was measured.According to the ARDL bound test results, Covid-19 new deaths and Covid-19 new cases had a significant impact on the EPU in both short-run and long-run, while the effect of recovery was not found. In addition, the Brent crude oil price also has an inverse and significant effect on the EPU. The findings of the study show that while the decline in oil price is expected to cause a decrease in the current account deficit and therefore a decrease in uncertainty in an emerging economy where the current account deficit creates extreme fragility, Covid-19 has increased uncertainty by dominating this situation.

Keywords

Crude oil, ARDL, economic policy uncertainty, Covid, coronavirus, EPU, Emerging markets

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