Economic Policy Uncertainty Around the World: Implications for Vietnam

Abstract

This paper reviews the literature on the impacts of uncertainty on various aspects of different economies and highlights the need for research to be carried out in the Vietnamese context. The findings of notable theoretical works suggest that high levels of uncertainty can have significant temporary impacts on economic outcomes, including a decrease in total output, employment, and productivity growth. We summarize the effects of uncertainty on firm behavior, bank behavior, and the financial market, factors that affect the economy, starting with the US context. We continue to examine global studies on the international economy and discuss research on the Asian economy, where we find some inconsistent results and discover new insights on the impact of uncertainty on the economy, revealing a need for continued research in each unique country setting. Given the limited evidence of the impact of uncertainty in the Vietnamese context, we highlight the value of further local research, recommend potential areas for future research, summarize the existing measures of uncertainty index, and suggest the construction of a new uncertainty index for Vietnam.