The role of economic policy uncertainty in the US entrepreneurship-unemployment nexus

The role of economic policy uncertainty in the US entrepreneurship-unemployment nexus
Document type
Article
Author(s)
Payne, James
Publisher
Emerald
Date of publication
1 May 2015
Series
Journal of Entrepreneurship and Public Policy. Vol. 4; Number 3
Subject(s)
Small business & enterprise: the practicalities of running a small business and the theory of entrepreneurship, Management & leadership: including strategy, public sector management, operations and production
Collection
Business and management
Material type
Reports

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The purpose of this paper is to extend the literature on the entrepreneurship-unemployment nexus to include the role of economic policy uncertainty in the causal dynamics. The study utilizes the Toda-Yamamoto causality tests of a vector autoregressive (VAR) model to infer the causal dynamics between the self-employment rate (SER), the unemployment rate (UR), industrial production (IP), and the economic policy uncertainty index (EPUI) in the case of the USA. In addition to the examination of the causal dynamics, generalise impulse response analysis is undertaken to examine the role of unexpected shocks to the current and future behaviour of the variables specified in the VAR model. The results reveal unidirectional causality from the SER, IP, and the EPUI to the UR. An increase in the SER and IP lowers the UR while an increase in the EPUI raises the UR. The findings also show unidirectional causality from the EPUI to IP in which an increase in the EPUI reduces IP. 

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