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    Impact of Economic Policy Uncertainty on Aggregate Consumer Loans: Evidence from an Emerging Economy
    (Institute of Economics Academia Sinica, 2024) Topçu, Güneş; Farhang, Amir Ali; Mohammadpour, Ali
    This study aims to examine the impact of economic policy uncertainty (EPU) on aggregate consumer loan demand in Türkiye using a novel Turkish EPU index developed by Topçu and Oran (2021). In addition, we included inflation, interest rate, and gross domestic product (GDP) as explanatory variables. The data covers the period from 2002Q4 to 2021Q2, and the analysis was conducted using an Autoregressive Distributed Lag (ARDL) model. The results demonstrate a significant and negative impact of the lagged EPU index on the demand for consumer loan amount in the short-term, while indicating a significant and positive impact of the EPU index in the long-term. The short-term negative sign is attributed to the precautionary saving motive while the long-term positive sign reflects the influence of government policies. Alternative indices from various regions revealed that Europe, the United States (US), Russia, and global EPU had no impact on aggregate loan demand in Türkiye, except for the Chinese EPU index. In light of the significant impact that Economic Policy Uncertainty (EPU) has on consumer loan demand and given that the Turkish EPU index mainly rises due to political uncertainty and elections, it is imperative to adopt measures that strengthen institutional resilience. This strengthening will ensure that decision-making processes remain robust and effective, even amidst potential governmental changes or disruptions.