Economic policy uncertainty and unemployment in Asia: a non-linear relationship approach

Abstract

The article examines the impact of economic policy uncertainty on unemployment of 5 typical countries in Asia: Japan, South Korea, Singapore, India, Hong Kong. Panel data was collected from the World Development Indicators and Economic Policy Uncertainty Index between 1997 and 2021. Unlike previous papers that often used time series data and regression models such as ARDL, VAR and VECM due to data limitations; This paper uses table data and POLS, FEM, REM regression models. These models are specialized for table data regression, to analyze the non-linear relationship between economic policy uncertainty and unemployment in 5 typical countries of Asia. The expected results suggest that economic policy uncertainty has the effect of increasing unemployment when countries experience a spike or a shock of uncertainty. Conversely, in low uncertainty, unemployment tends to decline as families tend to spend cautiously and increase labor. According to our findings, we found that a common threshold for the policy uncertainty index in Asian countries is 495, shocks of economic policy uncertainty above this level tend to rapidly increase unemployment. Therefore, it is necessary to take measures to ensure economic policy stability and establish effective control and supervision measures to ensure the effectiveness of policies and prevent potential risks.