Syed Shabi Ul Hassan

This paper investigates the impact of the U.S. economic uncertainty on the business cycles (changes in the industrial production) of 12 European Union (EU) countries before and during the global financial crisis. Empirical tests are conducted using the linear and non‐linear causality tests, impulse response function, and variance decomposition. Results show ample evidence of causality from the U.S. uncertainty to EU business cycles only when the crisis period is included in the analysis. Both the linear and non‐linear tests confirm the significance of U.S. uncertainty as a short‐term predictor of business cycles of the EU.