Economic Policy Uncertainty, Financial Expenditure and Energy Poverty: Evidence Based on a Panel Threshold Model

Abstract

The COVID-19 pandemic has forced people to pay more attention to the negative impacts of economic policy uncertainty on energy poverty. Meanwhile, through financial expenditure, governments might play a critical role in energy poverty alleviation, but there is little focus on this factor in the literature. We employ a panel threshold model to investigate the threshold effect of economic policy uncertainty between financial expenditure and energy poverty. This model can keenly explore the time-varying characteristics of financial expenditure. In order to control the endogenous influence, the estimators of the panel least square method are used to replace the corresponding endogenous variables. We find that financial expenditure has a significant positive effect on energy poverty alleviation, and that the positive effect has the threshold characteristic of economic policy uncertainty. With the rise in economic policy uncertainty, the positive effect of financial expenditure on energy poverty is continuously enhanced. Furthermore, we find that financial expenditure plays a more significant role in alleviating energy poverty in emerging economies than it does in developed economies.