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

Zhuo Wang, Yu Wei, Yue Shang, Qian Wang and Cheng Zhao

Research in International Business and Finance, 2025, vol. 74, issue C

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.

Keywords: Uncertainty indices by policy category; China GDP; MF-VAR; MIDAS quantile regression (search for similar items in EconPapers)
JEL-codes: C1 E6 O1 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:74:y:2025:i:c:s0275531924004975

DOI: 10.1016/j.ribaf.2024.102704

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