Sectoral Performances and Economic Policy Uncertainty in an Emerging Economy

This study investigates the dynamic interference of economic policy uncertainties on sectoral performances in an emerging economy - Nigeria. This step becomes expedient considering the vulnerability of developing countries to economic shocks and the lack of convincing explanations in previous studies. The dynamic autoregressive distributed lag (DARDL) and Kernel Regularized Least Squares (KRLS) techniques, as well as annual time series for the period 1981 to 2019, were relied upon for empirical expositions. Accordingly, a long-run relationship is established among the performance of each sector and the relevant explanatory variables. Overall, the empirical details reveal time-varying negative and significant effects of uncertainties on the performances of all the sectors, especially, the agricultural and the services sectors. Also, it is established that trade openness is a significant growth inhibitor, suggesting that the vulnerability of Nigeria economy to the waves of uncertainties is heightened by the levels of trade openness. Meanwhile, productivity levels in all the sectors are positive and significant functions of the exchange rate and investments. On this note, policies to shield the local economy from uncertainties must be sensitive to sectoral peculiarities and time variations. However, such efforts will be futile if trade openness is not taken into considerations. Expectedly, these discoveries are equally beneficial to the government, the local and international investors.