Global Uncertainty during COVID 19 Pandemic and its Effects on EU Member States with a Focus on Bulgaria

Abstract

The COVID pandemic has accelerated its influence over the whole world. This corresponds to increasing policy and trade uncertainty. The uncertainty on future trade relationships impacts investors’ behavior, their risk appetite, and the decline in global growth. In this paper, we aim to provide evidence on the relationship between global uncertainty and economic activity in the EU during the COVID pandemic. The applied methodology is a VAR model and a moving correlation. We discuss COVID 19 as a supply-demand shock that leads to a reduction of the productive capacity of the Bulgarian economy. The uncertainty of this pandemic causes shrinks of the demand in the private sector and an increase in the households’ savings and reduction in their expenditures.