The Impact of Economic Policy Uncertainty on Industrial Output: The Regulatory Role of Technological Progress

Since the 2008 financial crisis, EPU has become an important issue for the stable and healthy development of the economy and society. The existing research has not analyzed the nonlinear impact of economic policy uncertainty (EPU) on output at the industrial level, and it has also ignored the regulatory role of technological progress in the impact of EPU on economic growth. Based on panel data of China’s industry from 2005 to 2017, this paper makes an empirical analysis on the nonlinear impact of EPU on industry output. The results show that: (1) Different from the existing research, this paper finds that EPU has a significant inverted “U”-type nonlinear effect on industrial output, and when the EPU index is close to 221, this is best for output growth. This paper firstly finds that technological progress has a positive regulatory effect in the impact of EPU on industrial output. Technological progress can promote industrial output when EPU is low, and it can reduce the adverse impact of economic policy fluctuations when the EPU index is high. (2) The regulatory effect of technological progress only exists in the industries dominated by state-owned enterprises, and the impact of EPU on the output of non-state-owned enterprises’ leading industries is greater than that of state-owned enterprises. (3) The impact of EPU on the output of cyclical industries shows a significant inverted “U” shape, but there is no regulatory effect of technological progress. Its impact on the output of noncyclical industries is not significant, but it will work together with technological progress. (4) The influence of EPU on the output of the tertiary industry is characterized by an inverted “U” shape, in which technological progress can play a positive regulatory role. However, its impact on the output of primary and secondary industries is not significant.