Economic policy uncertainty in the US: Does it matter for the Euro Area?

We investigate the effects of a US economic policy uncertainty shock on some Euro area macroeconomic\r\naggregates via Structural VARs. We model the indicators of economic policy uncertainty recently developed\r\nby Baker et al. (2013) jointly with the aggregate price indexes and alternative indicators of the business\r\ncycle for the two above indicated economic areas. According to our SVARs, a one standard deviation\r\nshock to US economic policy uncertainty leads to a statistically significant fall in the European industrial\r\nproduction and prices of −0.12% and −0.06%, respectively. The contribution of the US uncertainty\r\nshock on the European aggregates is shown to be quantitatively larger than the one exerted by an Euro\r\narea-specific uncertainty shock.