Economic policy uncertainty in G7 countries: evidence of long-range dependence and cointegration

The global financial crisis which emanated from the USA has led to the development of indices for economic policy uncertainty for some developed and developing nations. Also, the current Brexit debate in the UK is a major economic influencer. 'News of news' or 'news of no News' in the daily newspapers in the USA and UK causes global economic uncertainty which has an aftermath reaction on the global economy. This study considers economic uncertainties in G7 countries using economic policy uncertainty indices developed majorly from newspapers information. The long-range dependence technique in time series was first carried out, and the results reveal an evidence of time series persistence for each country's index. This provided justification for the adoption of cointegration in a fractional integration set-up using the fractional cointegrating vector autoregressive model recently proposed. The long-run equilibrium results obtained showed that the USA and UK are dominant drivers of economic uncertainty among the G7 countries.