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Do economic policy uncertainties matter for economic growth? Evidence from MIDAS approaches

Author

Listed:
  • Wang, Zhuo
  • Wei, Yu
  • Shang, Yue
  • Wang, Qian
  • Zhao, Cheng

Abstract

Various economic policy uncertainties (EPUs) are closely related to economic growth. This study investigates the relationship between economic policy uncertainties (EPUs) and GDP growth in China over different time periods by using Granger causality test based on Mixed Frequency VAR (MF-VAR) model and Mixed Frequency Data Sampling (MIDAS) quantile regression, which have the advantages over traditional Granger causality test and quantile regression approaches in dealing with the problem of sampling difference in EPUs and GDP. The results show that the impact of EPUs on GDP varies depending on GDP growth rates, both in terms of magnitude and direction. Furthermore, the effects are asymmetric when GDP growth rates fall within extreme quantiles. Specifically, EPUs have a greater impact on GDP during periods of slower GDP growth. Finally, the impacts of COVID-19 and the Global Financial Crisis (GFC) have caused a shift in the magnitude and direction of the responses of GDP to EPUs, resulting in more apparent asymmetric effects. These findings can assist policymakers and investors in evaluating policy measures and investment decisions.

Suggested Citation

  • Wang, Zhuo & Wei, Yu & Shang, Yue & Wang, Qian & Zhao, Cheng, 2025. "Do economic policy uncertainties matter for economic growth? Evidence from MIDAS approaches," Research in International Business and Finance, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:riibaf:v:74:y:2025:i:c:s0275531924004975
    DOI: 10.1016/j.ribaf.2024.102704
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    More about this item

    Keywords

    Uncertainty indices by policy category; China GDP; MF-VAR; MIDAS quantile regression;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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