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Asymmetric impacts of economic policy uncertainty, capital cost, and raw material cost on China’s investment

Shaobo Long, Hongxia Pei, Hao Tian and Fangfang Li

Economic Analysis and Policy, 2021, vol. 72, issue C, 129-144

Abstract: As one of the main engines driving economic growth, investment has made an important contribution to China’s economy. However, in recent years, the growth rate of China’s fixed asset investment has shown a downward trend. Therefore, it is vital to determine the main influencing factors of China’s investment for formulating stable investment policies. Using the nonlinear autoregressive distributed lag (NARDL) model, this study finds that economic policy uncertainty, capital cost, and raw material cost have asymmetrical impacts on China’s fixed asset investment. Further research finds that the above variables have asymmetrical impacts on the two major components of aggregate investment, private investment and public investment, but the impact mechanism for each is completely different. When facing the positive or negative impacts from different factors, different investment entities will adopt different directions and magnitudes of investment decisions, ultimately leading to asymmetric relationships between various variables and aggregate investment.

Keywords: Economic policy uncertainty; Cost; Investment; NARDL (search for similar items in EconPapers)
JEL-codes: C32 E22 H54 O11 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:72:y:2021:i:c:p:129-144

DOI: 10.1016/j.eap.2021.08.005

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