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Health care policy uncertainty, real health expenditures and health care inflation in the USA

Chak Hung Jack Cheng and Nopphol Witvorapong
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Chak Hung Jack Cheng: University of South Carolina Upstate

Empirical Economics, 2021, vol. 60, issue 4, No 18, 2083-2103

Abstract: Abstract Based on a structural VAR model estimated with Bayesian methods over the period of 1985Q1–2017Q1, we investigate the effects of health care policy uncertainty (HCPU) on the US health sector. We find that HCPU exerts a negative and significant impact on the growth rate of real health expenditures and health care inflation. It has an especially persistent effect on health care inflation and explains a generous portion of the post-2007 decline in the growth rate of health care services prices in the USA. HCPU also dampens the growth rate of GDP and general inflation, eliciting cautiousness from economic agents and acting as a negative aggregate demand shock.

Keywords: Health care policy uncertainty; Health expenditure; Health care inflation; Bayesian VAR (search for similar items in EconPapers)
JEL-codes: C32 E32 I11 I18 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00181-019-01818-x

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