Economic policy uncertainty and unemployment rates in developed countries: interconnections before and after the 2008 crisis

Abstract

In this article, the Granger causality test is used to assess the relationship between economic policy uncertainty and unemployment rate in a sample of nine countries between 1997 and 2019. Furthermore, it investigates whether the 2008 financial crisis impacted this relationship based on the political aspects of full employment proposed by Kalecki, according to which the capitalist class is against the use of public spending to stimulate employment so as not to lose the indirect control they have over it - through the dependence of the employment level on the state of confidence in the economy, via private investment. The main results that emerge from the analysis point out that there is causality from economic policy uncertainty to unemployment rate in the pre-crisis period, but it does not continue from September 2008 onwards. The growing government intervention in the post-crisis period seems to indicate that national governments were able, while public opinion kept questioning failures of mainstream policies, to promote employment through their own spending, consequently weakening the indirect control practiced by the capitalist class.