The Effect of Economic Policy Uncertainty on Swedish Exports during the 2008 Financial Crisis

Sammanfattning: The thesis aims to answer the research question: To what extent was the increased Economic Policy Uncertainty during the Financial Crisis associated with the decline in Swedish exports from January 2007 to January 2010? During the 2008 Financial Crisis, Swedish trade fell by ten percentage points, slightly more than the world average. The thesis aims to investigate whether the increased EPU at the time affected the decreased exports. The thesis concludes that EPU does not seem to have had a statistically significant effect on exports during the crisis when controlling for the control variables inflation, GDP, and exchange rate. The lack of a relationship between the two variables could be because of Sweden’s stable economy and institutions, its diversified economy and trade, its membership in the EU, and its lack of bank collapse during the crisis. However, the control variables, inflation and exchange rate, have a statistically significant relationship with the decreased exports during the Financial Crisis.