ECONOMIC POLICY UNCERTAINTY AND MACROECONOMIC PERFORMANCE: A SYSTEMATIC REVIEW OF GROWTH, INVESTMENT, FINANCE, AND TRADE

Abstract

Economic policy uncertainty (EPU) has become a key macroeconomic issue during a time of frequent financial crises, geopolitical tensions, and global pandemics. A rapidly expanding body of literature documents that uncertainty surrounding fiscal, monetary, regulatory, and trade policies can significantly influence macroeconomic performance. However, existing evidence remains fragmented across countries, disciplines, and transmission mechanisms. This study provides a systematic review of the literature on economic policy uncertainty and economic growth, with a particular focus on key transmission channels, including investment, financial markets, and the external sector. Following a PRISMA-aligned review protocol, peer-reviewed studies indexed in Web of Science and Scopus were systematically identified, screened, and synthesized. The review indicates a strong consensus that increased economic policy uncertainty typically reduces economic growth. This relationship operates largely through reduced private and public investment, heightened financial market volatility, and weakened external sector performance via lower trade openness and exchange rate instability. The evidence further indicates that emerging economies experience more pronounced growth effects due to institutional fragility and greater exposure to external shocks. By integrating dispersed empirical findings within a unified analytical framework, this review advances understanding of the macroeconomic consequences of policy uncertainty and highlights the importance of predictable and transparent policy environments. The study concludes with policy implications for macroeconomic stabilization, investment promotion, financial market resilience, and international trade policy, and proposes directions for future research.