Catching the Political Leader's Signals: Economic policy uncertainty and firm investment in China
Jaehwan Lim and
Hongyong Zhang ()
Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)
This study uses a text dataset of the Chinese Presidentâ€™s speeches and reports from November 2012 to December 2021 to construct an original economic policy uncertainty (EPU) index: President Xi Jinpingâ€™s EPU (XiEPU). XiEPU moderately correlates with a previous studyâ€™s representative EPU, showing notably different peaks. Our index spiked in April 2016 after a sharp decline in the Chinese stock market index and late 2020, reflecting the global COVID-19 pandemic. Using firm-level panel data, we find that a higher value of XiEPU is associated with a lower investment rate at the quarterly level and has a larger and longer-lasting effect than the existing China EPUs. Moreover, there are noteworthy heterogeneous effects among firms and periods. Specifically, we find a stronger effect of XiEPU on manufacturing sectors, a weaker effect on state-owned enterprises, and a stronger effect in the second term of Xi Jinpingâ€™s presidential tenure after November 2017.
Pages: 37 pages
New Economics Papers: this item is included in nep-big, nep-cna and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:22081
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