Economic policy uncertainty and equity index in sub-Saharan African (SSA) countries: accounting for multiple structural breaks in a panel framework

This research offers distinctive perspectives on the relationship between the equity index and economic policy uncertainty (EPU) in Sub-Saharan African (SSA) nations. This new assessment is essentially motivated by the lack of evidence supporting this perspective, particularly in the context of SSA. The following conclusions are thus drawn using the novel multiple structural breaks test in panel (MSBP) and cross-sectionally augmented autoregressive distributed lag (CS-ARDL), which are based on the monthly longitudinal data for 11 SSA nations over the period of 2014M1–2023M6. First, the region's equity index is negatively impacted by high levels of economic policy uncertainty in the short term; second, while economic policy uncertainty negatively impacts the equity index in the region in the short term, its long-term negative effects are negligible; third, it is further evidence that economic policy uncertainty significantly lowers the equity index within the three identified structural break regimes but has negligible effects outside of them; and fourth, the devastating impact of economic policy uncertainty on the equity index is more pronounced during the COVID-19 era, supporting its susceptibility to global shocks. The main conclusions of the study suggest that government authorities should develop initiatives to increase the equity market's resilience to uncertainty brought on by economic policies.