Investigating Whether Economic Policy Uncertainty Affects Central and Eastern European Markets. Evidence from Twitter-Based Uncertainty Measures

After a period of relative stability over the last two decades, Central and Eastern Europe (CEE) has been exposed to a new wave of adversity and economic and social uncertainty. This study empirically investigates the interdependencies between the main stock market indices and uncertainty measures for five Central and Eastern European economies quantified by Twitter messages, namely Croatia, the Czech Republic, Hungary, Poland, and Romania.I applied a bivariate VAR model to five economic, political, natural disasters, recession, and fiscal measures and the value of the stock indices of the five Eastern-European markets. After establishing the optimal number of lags based on the Bayesian Information Criterion, I performed a Granger causality test to check for uni- and bidirectional causality. I found that certain measures Granger-cause changes in the stock indices of the analysed countries with some evidence of bidirectional relationships for selected measures