R&D Spending and Economic Policy Uncertainty in Asian Countries: an Advanced Panel Data Estimation Study

Abstract

Long-term economic development requires R&D, and countries develop economic policies that envision innovation development programs. However, economic policy uncertainty frequently distracts from economic outcomes. The study aims to investigate the long-term impact of economic policy uncertainty on R&D, with a particular emphasis on Asian countries. Because the selected countries possess typical dynamics, such as bilateral trade associations, technological expertise, and economic activities, the study employs the second-generation panel cointegration method from 2003 to 2018. The cointegration results of Westerlund (Oxford Bulletin of Economics and Statistics 69:709-748, 2007) confirmed a stable, long-run relationship between R&D, economic policy uncertainty, economic growth, and trade openness. According to the CS-ARDL findings, an increased economic policy uncertainty reduces R&D. Due to great economic collaboration among Asian countries; the effects are transmitted to R&D, especially international trade, business confidence, and economic growth. As a result, countries divert their resources to deal with the consequences, and investment suffers, whereas economic growth and trade openness help to expand R&D in the long run. It is evident that as economic growth accelerates, countries tend to invest more in R&D, and international trade encourages R&D. To promote prosperity in Asian countries, policymakers must design sound economic policies to counter unexpected events.