Economic Policy Uncertainty in the Wake of COVID-19 Pandemic in Kenya: Evidence from Wavelet Coherence Analysis

This study uses wavelet coherence approach on daily data of Covid-19 pandemic and Economic Policy Uncertainty in Kenya spanning from 13 th March 2020 to 22 nd October 2021. The paper aims to firstly adopt a new methodology to measuring economic policy uncertainty based on tweets and secondly to establish whether the Covid-19 pandemic resulted in economic policy uncertainty in Kenya. The study finds evidence of in-phase coherency between covid-19 pandemic and Economic Policy Uncertainty over varying frequency and time dimensions. The study also finds that there were uncertainty jumps during major pandemic events like waves and announcement of new variants by the World Health Organization. The implication of this study to policy makers is twofold. For one, it uses a new web scrapping approach to mine EPU data. The study recommends policymakers to purse this approach along other economic policy uncertainty measures particularly when they want to capture the effect of infectious pandemic on the economy. Secondly, the study offers an initial evidence-based benchmark on policy direction to take in a feat to protect investors and businesses from such shocks in the future as well as the remaining lifetime of the pandemic. From an academic point of view, the methodology can be applied in comparative analysis with other EPU measures such as monetary policy uncertainty and stock market variability. The EPU coefficients created can be used as variables in other studies.