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Economic policy uncertainty and household consumption: Evidence from Chinese households

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  • Wu, Weixing
  • Zhao, Jing

Abstract

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.

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  • Wu, Weixing & Zhao, Jing, 2022. "Economic policy uncertainty and household consumption: Evidence from Chinese households," Journal of Asian Economics, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:asieco:v:79:y:2022:i:c:s1049007821001640
    DOI: 10.1016/j.asieco.2021.101436
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