The Impact Of Economic Policy Uncertainty On The Allocation Of Household Risky Financial Assets

The financial crisis in 2008 caused a halt to our economic recovery.In order to address the problems that arose in the operation of the economy,our government intervened through various means in order to reduce economic volatility and achieve social stability.In recent years,scholars have conducted many research studies on economic policy uncertainty,but they have mainly focused on macro indicators as well as at the micro firm level,and the impact on household behavior has yet to be further expanded.As an important representative of microeconomic individual activities,the asset allocation behavior of households has received the attention of scholars.At present,the high proportion of housing and land assets and the uneven distribution of household asset classes in China’s household assets cannot well preserve and increase the value of household assets.Studying the impact of economic policy uncertainty on household risky financial asset allocation not only enriches the theoretical research on economic policy uncertainty and household financial asset allocation,but also has certain implications for individuals,financial institutions and governments.This paper adopts data from 2011 to 2017 of the China Household Finance Survey Project conducted by Southwest University of Finance and Economics regarding the financial dimension of Chinese households,and combines the China Economic Policy Uncertainty Index constructed by Baker et al.(2016)to study the impact of economic policy uncertainty on households’ willingness to allocate risky assets through Probit model,Logit model,Tobit model,OLS models to investigate the impact of economic policy uncertainty on the depth of households’ risky asset allocation.The study concludes that:first,at the overall level,economic policy uncertainty has a significant negative impact on the willingness and depth of households’risky financial asset allocation in China.Second,at the urban-rural level,there are differences in the sensitivity of households’ risky asset allocation behavior to economic policy uncertainty between urban and rural areas.Specifically,residents in rural areas are more significantly inhibited in their household risky financial asset allocation.Third,in terms of the gender of the household head,the consequences of economic policy uncertainty are significantly greater for male residents than for female residents.Fourth,in the mechanism analysis,since household insurance coverage is gradually improved with the increase of economic policy uncertainty,the improvement of household insurance coverage has a crowding-out effect on residents’precautionary savings to a certain extent,thus promoting households’ willingness and depth of participation in risky financial markets.Finally,based on the contents and conclusions of this paper,countermeasures that meet the realistic situation are proposed.At the household level,it is necessary to pay attention to the changes of national macroeconomic regulation and control,as well as to analyze rationally the scale of household wealth and individual risk-taking level according to the external economic trends,and to allocate assets reasonably to achieve asset preservation and appreciation;at the government level,the government,as the maker of economic policies,should ensure the stability and continuity of policies,and reduce the factors of instability caused by the "frequent changes" of economic policies;at the financial institution level,it is necessary to continuously enrich the types of financial products and improve the quality of financial products,and at the same time,it is necessary to correctly allocate assets to achieve asset appreciation."At the government level,the government,as the maker of economic policies,should ensure the stability and continuity of the policies and reduce the instability of the financial market caused by the frequent changes of economic policies;at the financial institution level,it should continuously enrich the types of financial products and improve the quality of financial products,and at the same time,it should correctly interpret the relevant economic policies of the government to give families the correct financial management.