Policy uncertainty and consumption in G7 countries: An asymmetry analysis

Abstract

In this study, we aim at assessing the effects of policy uncertainty on consumption in G7 countries. Unlike previous research, we take an additional step and show that the impacts are asymmetric, which helps us to have a better understanding of the effects of increased versus decreased uncertainty in the G7 economies. Our results suggest that policy uncertainty has indeed asymmetric effects on consumer expenditure in all G7 countries. These findings imply that the positive and the negative shocks could not offset each other’s impact on consumption, which leads to a different path of consumption before and after a period with a high level of uncertainty.