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Policy uncertainty and consumption in G7 countries: An asymmetry analysis

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  • Mohsen Bahmani-Oskooee
  • Majid Maki Nayeri

Abstract

In this study, we aim at assessing the effects of policy uncertainty on consumption in G7 countries. Unlike previous research, we take an additional step and show that the impacts are asymmetric, which helps us to have a better understanding of the effects of increased versus decreased uncertainty in the G7 economies. Our results suggest that policy uncertainty has indeed asymmetric effects on consumer expenditure in all G7 countries. These findings imply that the positive and the negative shocks could not offset each other’s impact on consumption, which leads to a different path of consumption before and after a period with a high level of uncertainty.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Majid Maki Nayeri, 2020. "Policy uncertainty and consumption in G7 countries: An asymmetry analysis," International Economics, CEPII research center, issue 163, pages 101-113.
    • Handle: RePEc:cii:cepiie:2020-q3-163-7
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    Cited by:

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    2. Simran, & Sharma, Anil Kumar, 2023. "Asymmetric impact of economic policy uncertainty on cryptocurrency market: Evidence from NARDL approach," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    3. Xuejun Jin & Xue Zhou & Xiaolan Yang, 2022. "How does economic policy uncertainty affect the relationship between household debt and consumption?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(5), pages 4783-4806, December.
    4. Emmanuel Uche & Bisharat Hussain Chang & Lionel Effiom, 2023. "Household consumption and exchange rate extreme dynamics: Multiple asymmetric threshold non‐linear autoregressive distributed lag model perspective," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3437-3450, July.
    5. Xu, Can, 2023. "Do households react to policy uncertainty by increasing savings?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 770-785.
    6. Xi Wang & Bisharat Hussain Chang & Emmanuel Uche & Qianli Zhao, 2024. "The asymmetric effect of income and price changes on the consumption expenditures: evidence from G7 countries using nonlinear bounds testing approach," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(1), pages 35-53, January.
    7. Dirks, Maximilian & Schmidt, Torsten, 2023. "The relationship between political instability and economic growth in advanced economies: Empirical evidence from a panel VAR and a dynamic panel FE-IV analysis," Ruhr Economic Papers 1000, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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    More about this item

    Keywords

    Policy uncertainty; Asymmetry; Consumption; G7;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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