Impact of economic policy uncertainty on non-farm employment: evidence from China

Frequent changes in economic policies will bring negative effects on the micro operating environment of banks. In this context, the functional effects of asset securitization create conditions for banks to effectively resist the adverse impact of economic policy uncertainty. In view of this, this paper examines the impact of economic policy uncertainty on the development of asset securitization of banks based on the related chain of “economic policy uncertainty—bank micro behavior change—asset securitization development”. It is found that the increase of economic policy uncertainty significantly promotes the development of bank asset securitization. Further, this paper discusses the internal mechanism of the positive impact, and finds that the adverse impact of economic policy uncertainty on the term mismatch, risk-taking and profitability of banks is an important motivation for banks to develop asset securitization, which confirms the original logic of the article, that is, the adverse impact of economic policy uncertainty on the micro operating environment of banks constitutes a series of motives for the development of bank asset securitization, and fully explains that the functional system of asset securitization can be an effective way for banks to cope with frequent policy changes. Finally, this paper studies the corresponding heterogeneity characteristics, and finds that economic policy uncertainty promotes the development of bank asset securitization, which is more significant in non-listed banks and small and medium-sized banks, because these banks lack sufficient adjustment means to adapt to the unstable political environment, and they need to use the functional system of asset securitization to deal with economic policy uncertainty. Therefore, it has a stronger impetus for the development of asset securitization.This paper holds that the main purpose of developing asset securitization is to deal with the uncertain external environment and its adverse impact on its own microstructure. Under the background that the outbreak of the COVID-19 Epidemic has led to the increase of economic policy adjustment and policy uncertainty, the regulatory authorities should not only continuously improve the institutional space for the effective function of asset securitization, but also pay attention to the “double-edged sword” feature of asset securitization, and strive to create a transparent and fair policy environment and stabilize the bank’s expectation of future policies. The conclusion of this paper expands the research field of bank asset securitization from the perspective of economic policy uncertainty, and deepens the cognition of the effect of economic policy uncertainty on bank behavior, which provides useful enlightenment for making the development strategy of asset securitization scientifically, and stabilizing bank behavior through the development of asset securitization under the background of the frequent adjustment of policies caused by the COVID-19 Epidemic.

Does economic policy uncertainty affect cross-border M&As? —— A data analysis based on Chinese multinational enterprises

There are direct as well as indirect linkages between economic policy uncertainty and carbon market through the channels of market fundamentals. This paper theoretically analyzes the linkages between economic policy uncertainty and carbon price and empirically examines the impact of Chinese economic policy uncertainty on Hubei carbon prices. A two-regime Markov-Switching process is introduced into the VAR model to examine the impact of economic policy uncertainty during different regimes of the carbon market. The empirical results show that the two-regime Markov-Switching model applies well in modelling the return series from Hubei carbon market during April 2014 to December 2017. Under the two different regimes, although the impacts from economic policy uncertainty are both significantly positive, the magnitude of the impacts differs. The impact of Chinese economic policy uncertainty on Hubei carbon price is larger during the low volatility period on carbon market than that during the high volatility period on carbon market.

Purpose: This study aims to evaluate the nature of the relationship between economic policy uncertainty and industry beta and the cross-sectional heterogeneity between them. Theoretical Framework: Industry Return is derived from the annual market capitalization of each industry by taking a summation of all firms' market capitalization values to find out the industry beta variable. The categorization of 48 industries according to the Fama-French model has been defined as the industry in this study. The main explanatory variable for this research strategy is the Economic Policy Uncertainty or the EPU. Economic policy uncertainty is measured based on the given index by Baker, Bloom, and David index. Baker, Bloom, and Davis, or BBD, perceive that there are different manners by which the economic policy uncertainty can be evolved. For instance, economic policy uncertainty can be influenced by what different types of discussions related to economic policies are going to be undertaken. BBD has tried looking into the landscape regarding the economic policy uncertainty overall through the eyes of newspapers based in the USA. In addition, there has been textual analysis by Baker, Bloom, and Davis or BBD over different types of digital archives for the top 10 U.S. newspapers for obtaining the count of articles on a monthly basis for every newspaper so that they can be able to focus on the specific economic policy uncertainty. Methodology: Positivist research philosophy has been implicated in conducting this research study. From the research approach perspective, the deductive research approach has been implemented. In addition, a quantitative research strategy has been used for modeling purposes and explanation. Furthermore, an experimental research design has been incorporated into this research strategy. The required data set has been gathered from secondary sources, including the WRDS and BBD databases. Industry return has been calculated based on industry market capitalization. From a modeling perspective, a baseline time series regression model has been incorporated. In this research conduction, there has been an analysis of 10 U.S. industries. The time span is from 2000 to 2020. In addition, there has been an analysis of different policy uncertainties based on the decomposition of EPU. Results & Conclusion: First, the impact of the economic policy uncertainty in the combined form on the industry-level betas has been analyzed. In this case, the entire time scale of 19 years has been divided into three classes: the financial turmoil period from 2001 to 2006, the financial turmoil period from 2007 to 2010, and finally, the financial turmoil period from 2011 to 2020. It has been pointed out that overall, there has been a statistically significant positive impact of economic policy uncertainty on industry level-betas mostly on all industries. In addition, when there has been a decomposition of the economic policy uncertainty index, a statistically significant positive association has been found regarding monetary policy uncertainty and fiscal policy uncertainty. Originality: The significance of this research is that there has been a one-to-one relationship finding on the impact of EPU on industry-level beta. Very few literatures have covered this issue broadly. One notable literature on this topic was conducted by Yu et al. in 2017. However, this research study has analyzed another ten industries in North America that have not been previously analyzed. In addition, for deep insight, the research framework has been divided into three parts: overall period analysis, pre-financial crisis turmoil, and post-financial crisis turmoil periods. In addition, there has been an analysis of the impact of component-wise seven policy uncertainty index on industry-level beta. Contribution: Different factors, including macroeconomic phenomena, can influence industry-level beta or systematic risk. In recent times, economic policy uncertainty analysis has become inevitable for measuring the policy implications and their impacts on industry-level risk to determine their dynamics. The relationship between the economic policy uncertainty index and the industrial structural model of risk dynamics has been established by this research study.

Time-varying causality impact of economic policy uncertainty on stock market returns: Global evidence from developed and emerging countries

Purpose Environmental pollution constitutes a critical global issue with consequences extending beyond national borders due to its capacity to cause global warming and climate change. While increasing energy demand and industrialization exacerbate this problem, the impact of economic policy uncertainty on environmental sustainability remains insufficiently clarified in the literature. This study aims to fill an important gap in the literature and reveal the dynamics of this relationship by examining the impact of economic policy uncertainty on carbon emissions within a holistic framework, alongside energy consumption and economic growth. Design/methodology/approach In this study, data on fossil fuel consumption, gross domestic product, economic policy uncertainty and carbon emissions for the United States from 1990 to 2022 were used, and the short- and long-term relationships between the variables were analysed using the Autoregressive Distributed Lag bounds test approach. This method was chosen because it produces consistent results despite the variables having different integration levels. Findings Empirical findings indicate that economic growth and energy consumption increase carbon emissions in both the short and long term. One of the study's innovative findings is that economic policy uncertainty has an accelerating effect on environmental pollution in the United States in the long term. This result contributes significantly to the literature by demonstrating that policy uncertainty can negatively affect firms' investments in environmentally friendly technologies, long-term energy strategies and sustainability-focused decision-making processes. The findings highlight the need for policymakers to develop regulatory frameworks that reduce fossil fuel-based energy use, encourage renewable energy investments and reduce uncertainty. Research limitations/implications This study analyses the impact of economic policy uncertainty, economic growth and fossil fuel energy consumption on environmental pollution under the restriction of the United States, which has a significant share in carbon emissions and has an important economy in the world. Practical implications These results support the need for policymakers to adopt innovative policy measures to shift from fossil fuel consumption-based energy use towards cleaner and renewable energy sources. Moreover, investing in low or zero carbon emission energy technologies is considered to be important to increase sustainable economic efficiency. Originality/value This study is one of the few investigations examining the impact of economic policy uncertainty in the United States on carbon emissions within a dynamic model framework, alongside energy consumption and economic growth variables. It fills a long-standing yet insufficiently addressed gap in the literature. Furthermore, the findings provide empirical evidence for current debates on the role of economic policy uncertainty in environmental sustainability, offering an innovative contribution to both environmental economics and energy policy. In relation to its contribution to the extant literature on the subject, the study proposes three significant innovations. Firstly, the integration of the economic policy uncertainty variable into environmental degradation analysis enables the assessment of the environment–economy interaction not only through economic growth or energy consumption but also through political instability and uncertainties in decision-making processes. Secondly, the study addresses theoretical lacunae that have been identified in the extant literature on energy and financial economics, elucidating the dynamic effects of policy uncertainty on environmental indicators. Thirdly, this analysis, conducted using the US example, provides empirical evidence of the interaction of economic and political factors in shaping global energy and environmental policies, thus providing policymakers with actionable insights.

Purpose Drawing on theoretically grounded hypotheses, this paper aims to compares the linear and asymmetric impact of Economic Policy Uncertainty (EPU) and Climate Policy Uncertainty (CPU) on firms’ attention to climate change-related opportunities. Design/methodology/approach The authors focus on a sample of German-listed firms observed from the first quarter of 2010 to the second quarter of 2022. The system GMM is used with standard error estimates robust to heteroskedasticity and autocorrelation within panels. The authors run robustness tests to explore issues that have been insufficiently addressed by the literature. Findings The linear estimation reveals that policy uncertainty exerts a positive effect on firms’ attention to climate opportunities, with CPU exerting stronger impact than EPU. The asymmetric estimators show that firms tend to increase their attention to climate-related opportunities when EPU rises, and are more likely to reduce this attention when CPU decreases. The attention of firms, operating in the manufacturing industry, to climate change-related opportunities is found to be more sensitive to uncertainty than that of firms in other sectors. The positive impacts of EPU and CPU are endogenous to physical and transitional climate risk. Research limitations/implications The results imply that market pressure should remain a key driver of corporate innovation in green technologies and act as a substitute during periods of lower economic policy uncertainty, to sustain firms’ attention to climate issues. Stronger safeguards should be implemented during times of decreased uncertainty, particularly those linked to pro-environmental regulations, legislation and the energy transition. Originality/value This paper explores explicitly the impact of uncertainty on firms’ engagement with low-carbon strategies rather on broader environmental metrics. It introduces a dual-uncertainty framework by using both Economic Policy Uncertainty (EPU) and Climate Policy Uncertainty (CPU) indices. It investigates the asymmetric effects of uncertainty which have not yet been explored in the context of firms’ commitment to climate change.

The reason of economic fluctuation has always been the most important topic in macro-economy research. In traditional economic theory, there are many reasons for economic fluctuation, both monetary factors and real economic factors will cause economic fluctuation. This paper takes the uncertainty of economic policy as the object of investigation, based on the perspective of sustainable development, and empirically tests the specific impact of economic policy uncertainty on macro-economy in a complete economic cycle through TVP-VAR model. Investment, consumption and R&D are included as endogenous variables. This paper empirically tests the impact of economic policy uncertainty on macro-economy variables such as investment, consumption, economic output and inflation rate in a complete economic cycle. The results show that the uncertainty of economic policy has a negative impact on investment and consumption. The negative impact of economic policy uncertainty in the fourth phase is the strongest, and the short-term negative impact will continue to deepen after 2019 until 2021, and the impact of the first phase will remain at around -0.15%. The variable that has the greatest influence on output fluctuation is economic uncertainty, which accounts for 84.15% of the fluctuation. Secondly, technological progress contributes 79.88% to output fluctuation, and economic uncertainty has a negative impact on output. The impact of economic uncertainty on output fluctuation is stronger than that on consumption, capital and employment.

Economic policy uncertainty and ADR mispricing

We conduct theoretical and empirical study on the impact of economic policy uncertainty on PM2.5 pollution. Economic policy uncertainty has important impact on PM2.5 pollution through investment channel and innovation channel. Specifically, according to real option theory, increase in economic policy uncertainty can reduce investment, thereby reducing PM2.5 pollution. However, increase in economic policy uncertainty can hinder corporate’s innovation activities, which in turn make PM2.5 pollution increase. Therefore, the impact of economic policy uncertainty on PM2.5 pollution depends on the combination effect of these two different effects. Furthermore, using 25 countries’ unbalanced panel data and fixed effects estimation methods, we empirically test the impact of economic policy uncertainty on PM2.5 pollution. The results show that, with the increase of economic policy uncertainty, countries’ PM2.5 pollution has significantly decreased. In addition, economic policy uncertainty has heterogeneous effect on countries’ PM2.5 pollution. Compared with countries who have higher R&D input, increase in economic policy uncertainty makes the reduction of PM2.5 pollution in countries with relatively lower R&D input higher. By changing the measurement methods of economic policy uncertainty and PM2.5 pollution indicators, and using 2SLS methods to estimate the models, the conclusions of the paper are robust. Finally, we put forward corresponding policy implications.

This study investigates the impact of economic policy uncertainty (EPU) on food prices (FP) in case of Pakistan by using monthly time series data from Jan 2011 to Dec 2023. The study utilized unit root tests such as, Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests to check the stationarity of the variables. To investigate the asymmetric relationship between EPU and FP, the study utilizes the Nonlinear Autoregressive Distributed Lag (NARDL) model along with the Bounds testing approach to determine the presence of long-run cointegration. The short-run results from the NARDL estimation indicate that an increase in EPU has a negative effect, leading to a decline in food prices. Conversely, the long-run findings reveal that EPU has a positive and significant impact on food prices. Additionally, the finding of Bound test confirmed the long-term Cointegration between EPU and food prices. This implies that to executing strategies that stabilize the macroeconomic environment and enhance market confidence can alleviate the inflationary effects of policy uncertainty on food prices. Further, improving supply chain resilience and establishing early-warning systems can help manage short-term price fluctuations caused by economic uncertainty.

Improving enterprises’ green innovation ability is beneficial to realize the “win–win” of economic development and environmental protection. As the global economic situation is complex and volatile, economic policies changed frequently. Will the rising uncertainty of economic policies affect enterprises’ green innovation? Taking China’s A-share-listed companies from 2008 to 2019 as the research sample, the Baker index based on news media and network information is used to measure the uncertainty of national economic policy, and the official exchange index based on the complex network is used to measure the uncertainty of economic policy in prefecture-level cities. It is found that there is an inverted U-shaped relationship between economic policy uncertainty and firms’ green innovation capability. Moreover, the uncertainty index of national macroeconomic policy is mostly on the left side of the inverted U shape, which can promote the improvement of enterprises’ green innovation ability. However, too frequent changes in regional economic policies will inhibit enterprises’ green innovation ability. This paper further analyzes the moderating effect of financialization of investment behavior and financing constraint on the impact of economic policy uncertainty on green innovation of enterprises from the perspective of investment and financing behavior choice. It is found that the impact of economic policy uncertainty on green innovation is more obvious for firms with low financing constraints and low financialization.

During recent years, global economic uncertainty has risen sharply. The effect of economic policy uncertainty on business activities has become a research hotspot in academia, while previous studies mainly focus on the independent individuals of companies. It is considered that companies are closely related with others from upstream and downstream industries, thereby market transaction costs significantly influence the survival and development of companies, especially in the presence of high economic policy uncertainty. Therefore, this paper explores the impact of economic policy uncertainty on vertical integration from the perspective of supply chain. Vertical integration is defined that companies control adjacent production stages vertically on the supply chain, internalizing transactions between external companies into internal production activities.To be specific, using a sample of listed companies from manufacturing industry during 2000-2018 in China, as well as the vertical integration indicator manually sorted out and calculated, this paper investigates the effect of economic policy uncertainty on vertical integration. The result shows that the higher economic policy uncertainty is, the more inclined companies are to pursue vertical integration. The robustness test and instrumental variable estimation show that this basic result is valid and robust. The heterogeneity analysis conducted at firm-, industry-, and region-level shows that for non-state-owned companies, companies with higher asset specificity, and companies from high-tech industries, more competitive industries, more volatile industries, and the eastern region, the effect of economic policy uncertainty on vertical integration is greater. Further, this paper explores the mechanism about how economic policy uncertainty influences vertical integration. The result shows that economic policy uncertainty significantly decreases the investment intensity of upstream suppliers and downstream distributors, and leads to higher financing constraints, thereby inducing the propensity of vertical integration. More than that, this paper analyzes the reason why economic policy uncertainty has a greater impact on upstream industries from three perspectives: government regulations on the upstream and downstream industries, the proportion of state-owned enterprises distributed in upstream and downstream industries, and the capital intensity of upstream and downstream industries.This paper has the following contributions: From the perspective of supply chain, it explores the impact of economic policy uncertainty on micro enterprise operation; from the perspective of economic policy uncertainty, it enriches the research on the influencing factors of vertical integration, and provides new empirical evidence from China’s manufacturing industry. In addition, from the perspective of supply chain management, this paper provides policy recommendations and management implications for local governments and enterprises to deal with emergencies and the resulting economic policy uncertainty.

The “double high phenomenon” is a phenomenon that listed companies hold high cash and high short-term loans at the same time. This paper takes China’s A-share listed companies from 2007 to 2018 as samples, and tests the impact of economic policy uncertainty on the “double high phenomenon” from the external macro environment of enterprises. It is found that there is a positive correlation between economic policy uncertainty and the “double high phenomenon”, that is, the higher the uncertainty of economic policy, the higher the probability of “double high phenomenon”. In order to ensure the reliability of the research results, this paper carries out a series of robustness tests, including replacing the measurement method of “double high phenomenon” variables and economic policy uncertainty variables, replacing the regression econometric model, distinguishing the duration of “double high phenomenon”, adding macro economic variables, and using the instrumental variable method, and the conclusion has not changed. In order to better understand the positive relationship between economic policy uncertainty and the “double high phenomenon”, this paper explores the transmission path of economic policy uncertainty on the “double high phenomenon”. It is found that economic policy uncertainty increases the probability of “double high phenomenon” by increasing the fluctuation of operating cash flow, financing costs and financial risks. In addition, further research on firm heterogeneity also finds that the positive relationship between economic policy uncertainty and the “double high phenomenon” is affected by the competitive position of product market, financing constraints and corporate governance level. That is to say, the positive effect of economic policy uncertainty on the “double high phenomenon” will be alleviated with the increase of product market competition, the alleviation of financing constraints and the improvement of corporate governance.The possible contributions of this paper are as follows: First, compared with the existing research about the impact of economic policy uncertainty on cash holding or financing, this paper focuses on the simultaneous “double high” impact of economic policy on corporate cash holding and short-term financing, expands the research on the economic consequences of economic policy uncertainty from the perspective of “double high phenomenon”, and supplements the corresponding research literature. Second, the existing research about the causes of “double high phenomenon” mainly focuses on the characteristics of the enterprise itself and governance. This paper focuses on the external macro environment of enterprises and studies the causes of “double high phenomenon” based on the uncertainty of economic policy, which enriches the research on the causes of “double high phenomenon”. Third, the conclusions of this paper will help policy-makers and accounting information users to understand the “double high phenomenon” and the impact of economic policy uncertainty on the behavior choice of micro economic entities more effectively, and enrich the research on the impact of macroeconomic policy on micro enterprise behavior decision-making.

PurposeThis study investigates the impact of economic policy uncertainty on corporation innovation in innovative cities. The study sheds light on different results from the previous literature by testing the moderator effects of entrepreneurial risk appetite on such impact.Design/methodology/approachA static panel estimator is applied to a Chinese sample of 416 firm-year observations from 2010 to 2019. This paper uses regression model to test the impact of uncertainty on enterprise innovation in innovative cities, and to test the regulatory role of entrepreneurial risk appetite. For a series of robustness analysis conducted by the author to deal with endogeneity, the results are robust.FindingsThe author finds reliable evidence that the economic policy uncertainty can promote corporations to invest more in R&D in innovative cities. In addition, the role of the entrepreneurial initiative is significant, and there is a positive moderating effect of entrepreneurial risk appetite between policy uncertainty and corporation innovation.Research limitations/implicationsFrom a practical point of view, this study examines the impact of economic policy uncertainty on corporation innovation in innovative cities for the first time. It emphasizes the role of entrepreneurial risk-taking in the development of corporation innovation in Shenzhen, an innovative city. This research is of great significance to the formulation of government policies and the innovative choice of entrepreneurs. In addition, the research shows that the entrepreneurial risk appetite in innovative cities can have a positive impact on enterprise innovation. Therefore, when formulating policies, the government should take the subjective factors of entrepreneurs into account and support enterprises with innovation potential. The evidence of this study also helps entrepreneurs make innovative decisions and enhance their confidence in enterprise development.Originality/valueBy studying the impact of economic policy uncertainty on enterprise innovation under the regulation of enterprise risk appetite, this study shows the subjective and positive role of entrepreneurs in risk grasp in innovative cities for the first time. In addition, it fills the gap of the impact of policy uncertainty on innovative urban enterprises. In fact, although it is traditionally believed that economic policy uncertainty has a negative impact on enterprise innovation, the sensitive findings of this study reveal completely different results from previous studies.