Economic policy uncertainty in US and Europe: time-varying Granger causality

This study provides insights into the linkage between the policy uncertainty index of the United States (US) and Europe based on the time-varying causality approach. We also consider the variability of these indices derived from the ARFIMA-GARCH models. Our findings indicate a prevailing causality running from US uncertainty to both European and European variability of uncertainty. The results are in line with some theoretical models that associate macroeconomic uncertainty and international spillover effects.