How does economic policy uncertainty influence the innovation activities: Empirical evidence from BRICS

Abstract

This study investigates the relationship between Economic Policy Uncertainty (EPU) and innovation activities within the context of the BRICS countries (Brazil, Russia, India, China, and South Africa) over the period from 2000 to 2019. Focusing on the interplay between economic policy uncertainty and innovation, this research aims to provide empirical evidence regarding the potential impact of EPU on innovation efforts within these emerging economies. By employing FMOLS (fully modified ordinary least square) and controlling for other relevant factors, the study seeks to isolate the specific influence of economic policy uncertainty on innovation outcomes across the BRICS countries. The findings of the study reveal a significant and negative relationship between EPU and innovation activities. The empirical evidence suggests that heightened levels of economic policy uncertainty tend to stifle innovation efforts across these economies. This negative effect underscores the potential hindrance that uncertain economic environments can impose on research, development, and the implementation of new ideas and technologies. The implications of these findings are important for policymakers, businesses, and researchers. Policymakers can use this evidence to recognize the importance of providing stable and predictable economic policy frameworks to foster innovation. In conclusion, this study contributes to the existing literature by shedding light on the intricate relationship between EPU and innovation activities. The empirical evidence presented herein underscores the need for policy measures that promote stability and predictability in economic environments to facilitate sustained innovation and economic growth.