The Uncertainty Triad and Economic Activity in the United States: A Multivariate Nyström QQKRLS Analysis

Uncertainty related to climate, energy, and trade impacts the magnitude of economic activity, owing to their evolving attributes. This study introduces a novel CEEMDAN-based multivariate Nyström quantile-on-quantile (C-MN-QQKRLS) methodology to evaluate the relationship of the uncertainty triad (CPU-EUI-TPU) with economic activity in the United States. This next-generation approach not only extends the bivariate setup, but isolates asymmetries over time-frequency spectra, concurrently controlling for other pertinent shocks. Additionally, it solves the computational discrepancies of the traditional kernel designs. The short-term outcomes establish that economic agents exercise instant tactical adjustments, validated by the positive association of EUI and TPU with economic activity (EAC). In contrast, the trilogy of uncertainty and EAC have negative association in their median-to-high quantiles. These outcomes underscore that prolonged uncertainty precludes economic activity. The long-run negative impacts of CPU-EAC, EUI-EAC, and TPU-EAC demands exigent attention. It requires the solution of climate-related issues, balanced energy mix, and appeased trade frictions between the US and its trading partners. The study concludes that unlike temporary policy uncertainty shocks, long-term or sustained uncertainty structurally inhibit economic activity in the USA.