Role Of Economic Policy Uncertainty Research Articles

Market Competition, Non-Interest Income and Risk-Taking of Small and Medium-Sized Banks

ABSTRACT Taking the data of 61 small and medium-sized commercial banks in China from 2014 to 2021 as a research sample, this paper conducts an empirical study on the relationship between market competition and the risk-taking of small and medium-sized banks, and further considers the moderating role of economic policy uncertainty and non-interest business income. The results show that the intensification of market competition increases the risk-taking of small and medium-sized banks. Meanwhile, economic policy uncertainty dampens the positive effect of market competition on bank risk-taking, and commission income and other non-interest income have important mediating effects in the relationship between market competition and bank risk-taking.

Natural resource development, economic policy uncertainty and urban residents’ consumption in China: a nonlinear ARDL and time-varying parameter vector autoregressive with stochastic volatility approach

AbstractIncreased risks of economic policy uncertainty and overexploitation of natural resources exist in China. At the same time, the growth rate of urban residents’ consumption has generally declined. The paper analyses the role of economic policy uncertainty (EPU) and natural resource exploitation on the urban residents’ consumption in China. Based on the data from the first quarter of 2002 to the third quarter of 2021, the paper uses a nonlinear autoregressive distributed lag model to verify the asymmetric effects. Then the paper constructs a time-varying parameter vector autoregressive model with stochastic volatility term to analyze the nonlinear responses. Impulse response analysis was used to further explain the relationship between the three. The negative impact of rising EPU on urban residents’ consumption is larger than its reduction. Negative shocks to natural resource development increase the urban residents’ consumption. Positive shocks reduce the urban residents’ consumption. There is a time-varying non-linear effect of EPU and natural resource development on urban residents’ consumption in China. The negative impact of EPU on urban consumption has been further exacerbated by major crises such as the financial crisis, COVID-19 and the post-crisis period. The negative impact of natural resource development diminished after the government introduced industrial upgrading policies and environmental regulations. This study provides constructive suggestions for the optimization of economic policies and the improvement of urban consumption. This study also enriches consumer theory and provides new evidence for the resource curse hypothesis.

Pricing the common stocks in emerging markets: The role of economic policy uncertainty

We examine the role of news-based policy uncertainty measures in capturing the cross-section of average stock returns in emerging markets. After controlling for the five established risk factors of Fama and French (FF), we find that policy uncertainty factors are redundant in capturing the average returns of portfolios constructed by considering well-known firm characteristics (size, book-to-market ratio, profitability, and investment). The pricing performance of the five factors model, both statistically and economically, does not improve with the addition of policy uncertainty factors. We argue that the news-based factors' information content is contained in FF risk factors. Our results are robust to additional test statistics and various policy uncertainty factors.

The role of Economic Policy Uncertainty and Foreign Direct Investment on Consumption- Based Carbon Emission in G7 Countries

The role of Economic Policy Uncertainty and Foreign Direct Investment on Consumption- Based Carbon Emission in G7 Countries

Effect of Economic Policy Uncertainty on Exchange Rate Volatility in Pakistan

This study examines the effect of economic policy uncertainty on Pakistan’s exchange rate. Pakistan’s exchange rate always remains under pressure due to the widening inflow-outflow gap in foreign exchange. The volatile exchange rates make it harder for businesses to invest and make inflation more uncertain, which ultimately slows down productivity and GDP growth. Due to the close linkages of the exchange rate with the economic indicators, it is required to examine the effect of different economic variables on the exchange rate and its volatility by incorporating the role of economic policy uncertainty. The study uses the sample of Jan 2011 to Dec 2022 for the empirical results. The study employs the EGARCH model for empirical results. The aftermaths of the mean equation of the EGARCH model suggest that economic policy uncertainty has a positive effect on Pakistan’s exchange rate. Moreover, an increase in the economic policy uncertainty scale, increases the volatility in Pakistan’s exchange rate. The primary source of exchange rate volatility is the nominal variable rather than the real variables. On the basis of the study’s findings, certain relevant recommendations were given in order to stabilize the foreign exchange market in Pakistan.

Bitcoin attention and economic policy uncertainty

This paper explores the role of Economic Policy Uncertainty (EPU) as driver of the Bitcoin public attention. Using Google trends data from January 2010 to November 2021 in a set of 22 countries, a Principal Components Analysis reveals a strong unique commonality on the internet searching patterns for Bitcoin across countries, which suggests that the potential explaining factors of the Bitcoin attention should be global instead of local. The multivariate analysis corroborates this hypothesis since EPU at the country level does not play a significant role in explaining the searching patterns on Google for Bitcoin, while the global EPU does.

The influence of income, economic policy uncertainty, geopolitical risk, and urbanization on renewable energy investments in G7 countries

Renewable energy infrastructure development is seen as critical to solving environmental issues. Nevertheless, researchers have not adequately paid attention to how the socioeconomic and geopolitical environment affects renewable energy investments (REINV), which are important for promoting clean energy. In line with this gap, this research aims to analyze the role of economic policy uncertainty (EPU) and geopolitical risk (GPR), as well as controlling economic growth (GDP) and urbanization (URB) in G7 countries by considering their leading role in both economic and political areas. To this end, the study applies the augmented mean group (AMG) approach by constructing three different models for the period 2004–2018. The panel data results reveal that (i) GDP has a significantly increasing effect on REINV; (ii) EPU, GPR, and URB have a decreasing effect on REINV; (iii) the effect of EPU is much stronger than that of GPR; (iv) institutional structure, represented by government efficiency and regulatory quality, has no effect on REINV. Based on the results, the study points out that G7 countries need to promote transmission mechanisms that encourage REINV and take steps to minimize the negative effect of EPU and GPR on clean energy investments.

How does economic policy uncertainty shift the firm’s future profitability enhancement through intangible capital?

Purpose This study aims to investigate the effect of intangible capital (e.g. intangible investments and research and development (R&D) expenditures) on future profitability in an emerging economy and the moderating role of economic policy uncertainty (EPU) for companies listed on the Tehran Stock Exchange. Design/methodology/approach To this aim, information about 210 companies during 2014–2021 was collected. This study calculated EPU based on the inflation rate, interest rate, exchange rate and economic growth. Findings The results showed that both R&D expenditures and other intangible investments positively affect future profitability. Moreover, EPU decreases the positive effect of R&D expenditures and other intangible investments on future profitability. Hypothesis testing based on ordinary least squares and generalized method of moments regressions confirmed these results. This study emphasizes the urgent need to adjust how they operate the business during the COVID-19 pandemic. Originality/value The nature and degree of intangible assets and R&D expenditures in firms in emerging markets is an interesting area of research. However, empirical studies in this area have not led to any unanimous conclusion in emerging markets. Moreover, intangible assets and R&D expenditures become very important in the economy affected by the financial crisis and conditions of uncertainties. In light of the COVID-19 crisis, significant changes occurred at all levels and affected accounting-related issues, and the present study highlighted COVID-19. The findings of this research will not only help the managers of companies in developing countries but also, because of the dearth of similar research, they can help managers in developed countries and the global community.

Do clean and dirty cryptocurrencies connect with financial assets differently? The role of economic policy uncertainty

This paper analyzes time-varying networks of clean and dirty cryptocurrencies with green and traditional assets through a dynamic connectedness approach established by the time-varying parameter vector autoregressive (TVP-VAR) model. The underlying asymmetry of the dynamic pairwise connectedness when facing uncertainty shocks is further studied through a non-parametric quantile causality method. Our results demonstrate a limited information transmission of volatility from cryptocurrencies to both traditional and green assets, while the connection of clean cryptocurrencies (CI) with the financial system is even weaker compared to that of dirty cryptocurrencies (DI), especially after the COVID-19 pandemic. In contrast, connection within the financial system is found to be relatively closer. Moreover, causal relationships between economic policy uncertainty (EPU) and cryptocurrency-financial asset linkages are generally enhanced after the pandemic onset, while such the causality of uncertainty with DI related asset linkages tends to be even stronger. Most of the above causalities are shown to be negligible during market depression, further implying the sheltering role of the market linkages against uncertainty.

Revisiting the natural resources-financial development nexus in China: The importance of economic policy uncertainty

The existing literature extensively probes how natural resources impact financial development, however, there is no evidence on the role of economic policy uncertainty amidst the natural resources-financial development nexus. Moreover, the prior literature ignores the effect of structural breaks while estimating the parameters. Based on such arguments, this study investigates the combine impact of natural resources and economic policy uncertainty on financial development in case of China for the period of 1989–2021. In doing so, we apply noval econometric approach which handles the structural breaks named as Fourier Autoregressive Distributed Lag (FARDL) aaproach. Our findings show that natural resources escalate financial development, however, the synergy of natural resources and economic policy uncertainty plunges financial development across the long-run and short-run. Further, we run sensitivity analysis and find the results similar to the baseline outcomes. The results compel us to suggest some policy recommendations. For instance, policymakers should strive to control economic policy uncertainty in China for the promotion of financial development.

On conflict of natural resources-carbon emissions nexus in China: The role of economic policy uncertainty

Environmental degradation has been an acute issue all over the world, especially in emerging economies. Being an emerging economy, China also witnesses this issue. Therefore, actions have been taken by the Chinese policymakers to wane CO2 emissions, which in turn lead to environmental degradation. However, policy actions need strong research-backed evidence on the drivers of CO2 emissions. Hence, researchers explore the determinants of CO2 emissions. Prior literature explores how economic policy uncertainty and natural resources impact CO2 emissions, however, the role of economic policy uncertainty amid the natural resource-emissions nexus remains ignored. That is, the interaction effect of EPU and NRR remains ignored in the existing literature. Hence, the present study attempts to investigate the natural resources-CO2 emissions nexus amidst economic policy uncertainty in China. The analysis adopts annual time series data covering the period 1989–2021. This study employs the novel Fourier ARDL to provide authentic outcomes. The results document that natural resources escalate emissions. Moreover, the synergy of natural resources and economic policy uncertainty also upsurges CO2 emissions. Thus, we propose to wane economic policy uncertainty to circumvent the environmental impacts of natural resources.

The Heterogeneity of European Bank Lending and the Role of Economic Policy Uncertainty

The Heterogeneity of European Bank Lending and the Role of Economic Policy Uncertainty

Capital investments and firm characteristics: The moderating role of economic policy uncertainty in the hospitality sector

The study explores the association between capital investments (CI), Economic Policy Uncertainty (EPU) and firm characteristics for 420 hospitality firms in India. Utilising the dynamic panel data approach, it addresses two main questions: How are current and past investments in CI influenced by current and past global and domestic EPU after controlling for different firm characteristics? Secondly, it considers the moderating effect of EPU and liquidity on CI in sampled firms. The findings of the study demonstrate that past domestic EPU, liquidity, profitability, sales growth and leverage positively impact CI. Whereas current global EPU, current domestic EPU, past global EPU, age and size negatively affect CI. For moderating effect of EPU and liquidity, it was noted that negative impact of EPU on CI was less pronounced for firms displaying greater liquidity. Overall, the study finds evidence of global EPU being more persistent and having a long-term negative effect on CI. The findings would be of significant use to policymakers and the hospitality industry. The policymakers may focus on improving liquidity during policy uncertainty to boost CI.

Impact of Economic Policy Uncertainty on Agribusiness Technology Innovation: Evidence from 231 Listed Firms in China

The role of enterprise technological innovation in driving high-quality economic development has become increasingly prominent in a dynamic environment of uncertainty. This study examines the impact of economic policy uncertainty on enterprise technological innovation and its mechanism of action using panel data of agricultural listed firms in China 2007–2021. We obtain the following results. (1) Economic policy uncertainty significantly promotes technological innovation in agricultural firms, and this finding holds under various robustness checks, and works mainly through two paths: tightening financial flexibility and highlighting managerial capabilities. (2) From the heterogeneity results, the incentive effect of economic policy uncertainty on technological innovation in agricultural firms is more pronounced in state-owned agricultural firms, basic agricultural firms, and high adjustment cost agricultural firms. (3) Government subsidies strengthen the role of economic policy uncertainty in promoting technological innovation in agricultural firms. The results of this study provide data support for agricultural firms technology innovation decisions and have important implications for the guidance of national economic policy formulation.

Product Market Competition, Corporate Investment, and Firm Value: Scrutinizing the Role of Economic Policy Uncertainty

This study examines the effects of product market competition on corporate investment and firm value and the moderating role of economic policy uncertainty on this relationship. The firm-level data of 1971 listed corporate firms for BRIC (Brazil, Russia, India, China) countries during 2009–2020 were used, totaling 23,652 observations. Using the GMM estimates, our results depict that product market competition significantly influences corporate investment and firm value in BRIC countries. The result also reveals that economic policy uncertainty plays a significant role in the impact of product market competition on corporate investment and firm value at Brazilian, Russian, Indian, and Chinese firms. The study’s findings contribute to the body of knowledge by providing new evidence on the relationship between PMC, corporate investment, and firm value. These findings are vital for policymakers and regulatory bodies to focus on economic uncertainty in a competitive environment without jeopardizing investment returns in emerging markets.

Business strategy and sustainability of Chinese SMEs: determining the moderating role of environmental uncertainty

This paper investigates the relationship between business strategy and sustainability of Chinese SMEs and how the environmental uncertainty may affect this relationship. It analyses the impact of active and passive business strategies on firms’ sustainability and tests the potential moderating role of economic policy uncertainty in this relationship. The empirical analysis is performed by employing fixed-effect and GMM estimations on data collected from 937 Chinese A-share non-financial companies listed on the Shanghai and Shenzhen stock exchanges from 2010 to 2021. The results show that the high-risk active business strategy of innovation and new market development is associated with greater business sustainability, and this relationship is stronger for SMEs than for non-SMEs in China. Moreover, higher economic policy uncertainty strengthens the positive relationship between active business strategy and firm sustainability, implying that in periods of higher environmental uncertainty firms which pursue active business strategy achieve greater business sustainability. These findings are useful for devising business strategy and can assist in formulating policy initiatives seeking to ensure sustainable development of SMEs in China.

Corporate social network and corporate social responsibility: A perspective of interlocking directorates

This study aims to analyze the role of the corporate social network (CSN) derived from interlocking directors on a firm's corporate social responsibility (CSR) and further investigate the moderating role of economic policy uncertainty (EPU) in the institutional background of China. Empirical results show that an advantageous network position in a CSN can significantly encourage firms to undertake CSR. However, this effect is a nonlinear one. The increase in CSR is at a decreasing rate as CSN increases. Furthermore, the effect of CSN on CSR is less salient when EPU is high. This research guides managers on using the advantages of firms in CSNs and actively undertaking CSR to improve social and environmental sustainability substantially. In addition, this study also helps the government issue reasonable CSR evaluation standards and incentive policies and stabilize macroeconomic policies.

Factor-timing in the Chinese factor zoo: The role of economic policy uncertainty

In this study, we investigate the predictive power of economic policy uncertainty (EPU) on factor returns in the Chinese market. We find that EPU can significantly but negatively predict the size premium (i.e., small-minus-big returns) at short and long horizons. However, such results are not evident in the prediction of 15 other characteristic-related factor returns, including the market, momentum, value, profitability, investment, and a range of mispricing or risk factors. The results are robust to various control variables and out-of-sample tests. Evidence further confirms that EPU can contribute to factor timing, especially size timing, in stark contrast with the evidence found in the US market. Economically, the cash flow and flight-to-safety channels may account for the predictive power of EPU.

RESEARCH ON THE INFLUENCE OF CORPORATE SOCIAL RESPONSIBILITY INFORMATION DISCLOSURE QUALITY ON CORPORATE PERFORMANCE

Due to the poor quality of social responsibility information disclosure of Chinese enterprises, coupled with the impact of the spread of COVID-19, the uncertainty of the global economic environment and economic policies has increased significantly, and the development of Chinese enterprises is facing unprecedented challenges.Based on the sample of A-share listed companies in Shanghai and Shenzhen from 2010 to 2019, this study examined the impact of the quality of social responsibility information disclosure on corporate performance and the moderating role of economic policy uncertainty. Research shows that enterprises can improve corporate performance by disclosing high-quality social responsibility information.With the increasing of economic policies uncertainty, enterprises should disclose high-quality social responsibility information that will help enterprises improve their performance in the uncertain economic situation.

Does Environmental Degradation-Led Remittances Flow? Nexus between Environmental Degradation, Uncertainty, Financial Inclusion and Remittances Inflows in India and China

The motivation of the study is to gauge the role of economic policy uncertainty (EPU), environmental degradation (ED), and financial inclusion (FI) on remittances in India and China for the period 2003Q1-2022Q1. The study performed several econometrical tools such as both conventional and structural break unit root tests, long-run cointegration between variables investigative by performing the novel combined cointegration test, augmented autoregressive distributed lagged (AARDL) implemented for exploring long-run cointegration and explanatory variables magnfititutes on remittances both in the long-run and short-run and directional causality performed with Fourier TY causality test. Combined cointegration and the AARDL test ascertained the long-run association in the empirical equation. Refers to long-run coefficients of EPU, ED, and FI, it revealed a positive and statistically significant linkage with remittance inflows in the economy. In addition, the causality test reveals directional effects available between FDI, GLO, and remittances, but the direction differs from among economics. Furthermore, the study performed a robustness test by implementing dynamic OLS, fully modified OLS and CC regression and supported the earlier model established relationship, especially in the long-run the coefficients of EPU, ED, and FI.