Economic Policy Uncertainty, Bank Credit, External Demand, and Corporate Investment

Wentao Gu (), Xiaoyan Zheng (), Liyan Pan () and Hengkui Li ()
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Wentao Gu: Institute of Quantitative Economics, Department of statistics, Zhejiang Gongshang University, Hangzhou 310018, China.
Xiaoyan Zheng: Quantitative economics, Department of statistics, Zhejiang Gongshang University, Hangzhou 310018, China.
Liyan Pan: Quantitative economics, Department of statistics, Zhejiang Gongshang University, Hangzhou 310018, China.
Hengkui Li: Quantitative economics, Department of statistics, Zhejiang Gongshang University, Hangzhou 310018, China.

Journal for Economic Forecasting, 2018, issue 3, 52-72

Abstract: The studies on economic policy uncertainty are growing recently, since it is an important topic in many economic research areas such as financial crisis, economic forecasting, corporate investment and so on. Using the data of Chinese listed companies from 2004 to 2013 and following the non-dynamic threshold panel model, this study investigates how economic policy uncertainty influences the corporate investment of firms with different external demands through bank credit. To our best knowledge, the research on the influence channel of the bank credit is new in the literature. The effects of economic policy uncertainty on corporate investment through bank credit are obvious, and the effects are more significant for firms with low external demand than those that have high external demand. However, this result is influenced by the varying characteristics of controlling shareholders and industries as well as the different degrees of financial development. The effects of economic policy uncertainty are also significant for state-owned firms, manufacturing firms and high financial development group with low external demand.

Keywords: economic policy uncertainty; credit channel; firm heterogeneity; external demand; threshold panel model (search for similar items in EconPapers)
JEL-codes: D80 E22 E60 G32 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (29)

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