Nexus between economic policy uncertainty and institutional quality: evidence from India and Pakistan

ABSTRACT

The motivation of this study is to gauge the asymmetric effects of economic policy uncertainty (EPU) on institutional quality (IQ) in India (Pakistan), spanning the period 2003Q1 to 2019Q4 (2010Q1 to 2019Q4). The study applied DF-GLS and Zivot–Andrew, ARDL bound test, nonlinear ARDL and directional causal with the Toda-Yamamoto causality test. According to the combined cointegration test, the long-run economic policy uncertainty was exposed to adverse association with institutional quality in India and Pakistan. Both long-run and short-run asymmetries were confirmed between EPU and IQ. The causality test revealed the feedback hypothesis in explaining the causality between EPU and IQ.

KEYWORDS:

• Institutional quality
• economic policy uncertainty
• financial openness
• trade openness
• asymmetry

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No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

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Md. Qamruzzaman

Md. Qamruzzaman is a Ph.D. associate professor in the United international University, School of Business and Economics. He completed his Ph.D. specialized in financial innovation from the School of Economics, Wuhan University of Technology. His research interest on financial innovation, energy financing, SME innovation, and Renewable energy. He published several papers in prestigious international journals focusing on his key interest in research.