Policy Volatility in Times of Uncertainty

Global turmoil over the last two decades, marked by multiple and often interlinked crises, has created an environment of heightened perceived global policy uncertainty. While such uncertainty has been linked to various adverse macro- and microeconomic outcomes for businesses and households, its impact on the durability of policies after enactment remains underexplored. Existing research predominantly focuses on institutional, political, or policy-specific variables. This paper addresses this gap by conceptualizing different types of policy volatility based on the timing and frequency of policy modifications and examining whether perceived global policy uncertainty influences these dimensions. In other words, does variation in perceived uncertainty affect policy volatilty? Using a dataset of EU secondary legislation, the paper employs a Cox proportional hazards model to analyze the timing of policy changes and a negative binomial model to assess their frequency, capturing two dimensions of policy volatility. The findings reveal a statistically significant effect of perceived uncertainty, alongside varying effects of institutional and policy-specific factors. This paper contributes to the literature on policy durability in two key ways. First, it conceptually refines the notion of policy volatility, identifying ideal types that differ in their severity of volatility. Second, it empirically demonstrates how uncertainty perceptions, often treated as exogenous shocks, interact with established explanatory factors to shape policy volatility during periods of global turmoil.