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Symmetric and asymmetric impact of economic policy uncertainty on food prices in China: A new evidence

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  • Wen, Jun
  • Khalid, Samia
  • Mahmood, Hamid
  • Zakaria, Muhammad

Abstract

The study explores the symmetric and asymmetric impact of economic policy uncertainty (EPU) on food prices in China for the period from 1998M1 to 2020M5. The linear Autoregressive Distributive Lag (ARDL) framework is used to evaluate the symmetric effect. However, the nonlinear Autoregressive Distributive Lag (NARDL) model is employed to gauge the asymmetric impact of the EPU on food prices in the short run and in the long run. According to ARDL results, an increase in EPU leads to a significant increase in food prices both in the long run and in the short run. In NARDL short run results, the Wald test statistic confirms the presence of asymmetry. It is found that negative EPU shocks have a positive and significant effect on food prices, while positive shocks have a negative but insignificant impact. In the long run, the Wald test for asymmetry shows that there is no evidence of asymmetry. Also, the impact of positive and negative EPU shocks is insignificant. The dynamic multiplier graph for NARDL shows the adjustment of asymmetry after negative and positive shocks towards long-run equilibrium. The overall impression is that negative shocks of uncertainty have a deeper effect than positive shocks on food prices in China. The overall analysis shows that EPU shocks have an asymmetric impact as they are sudden, unforeseen and disrupt food price stability in the short-run only. Yet it will shift towards equilibrium again in the long-run.

Suggested Citation

  • Wen, Jun & Khalid, Samia & Mahmood, Hamid & Zakaria, Muhammad, 2021. "Symmetric and asymmetric impact of economic policy uncertainty on food prices in China: A new evidence," Resources Policy, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:jrpoli:v:74:y:2021:i:c:s0301420721002580
    DOI: 10.1016/j.resourpol.2021.102247
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    More about this item

    Keywords

    Policy uncertainty; Oil prices; Food prices; Asymmetric;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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