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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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    4. Xu, Can, 2023. "Do households react to policy uncertainty by increasing savings?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 770-785.
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    6. Kai‐Hua Wang & Zu‐Shan Wang & Hong‐Wen Liu & Xin Li, 2023. "Economic policy uncertainty and geopolitical risk: evidence from China and Southeast Asia," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 37(2), pages 96-118, November.
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    8. Long, Shaobo & Xue, Ning & Zhang, Yuan, 2025. "The divergence of China’s prices under economic policy uncertainty shock: A time-varying perspective," The North American Journal of Economics and Finance, Elsevier, vol. 76(C).
    9. Massil, Joseph Keneck & Tadadjeu, Sosson & Yogo, Urbain Thierry, 2025. "Uncertainty and household consumption in developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 73(C), pages 51-64.

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