Economic policy uncertainty and household consumption: Evidence from Chinese households

We find that households reduce their consumption in response to higher economic policy uncertainty (EPU). Compared with lower income households, high income group is more severely affected which can be explained by the portfolio choice of illiquid asset and liquid asset. In addition, the uncertainty...

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Bibliographic Details
Published inJournal of Asian economics Vol. 79; p. 101436
Main Authors Wu, Weixing, Zhao, Jing
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.04.2022
Subjects
Economic policy uncertainty
Household consumption
Portfolio choice
Portfolio choice
Household consumption
Economic policy uncertainty
D12；D14；E21
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Summary:We find that households reduce their consumption in response to higher economic policy uncertainty (EPU). Compared with lower income households, high income group is more severely affected which can be explained by the portfolio choice of illiquid asset and liquid asset. In addition, the uncertainty effect is more pronounced among older, wealthier, well-educated and urban households. The impact of EPU on household consumption is also persistent. Holding more liquid asset and commercial insurance represent important channels in mitigating the negative effect of EPU on household consumption.
ISSN:1049-0078
1873-7927
DOI:10.1016/j.asieco.2021.101436