Economic policy uncertainty, dual-wheel drive and economic growth

In the new normal, Chinese government has implemented a two-wheel drive economic growth model of innovation and investment. Will the increase in economic policies uncertainty significantly affect the two-wheel drive effect of economic growth, and thus affect the policy effect? To systematically answer this question, this paper first reveals the non-linear effects of economic policy uncertainty on economic growth through investment and innovation driven by two-wheel drive based on the principle of real options. Based on this, the time-varying VAR model is empirically tested to examine the impact of the uncertainty of China's economic policy on economic growth through investment and innovation. We found that: China's economic policy uncertainty inhibited economic growth, and showed a time-varying character, thanks to the improvement of the macroeconomic environment, this inhibition effect has been reduced to some extent after the new normal economy; Under the interference of economic policy uncertainty, the positive driving effect of investment on economic growth has slowly decreased, and the positive driving effect of innovation on economic growth has gradually increased. The government should maintain the continuity and inertia of the policy and be alert to the impact of policy uncertainty on the economic two-wheel drive policy. © 2019, Editorial Board of Journal of Systems Engineering Society of China. All right reserved.