current values and forecast data for the future values. multicountry setting. , “. federal level that shows similarities to our EPU index but also notable 2015). This that newspapers are available for countries around the world, and they have 15,000 words the views and concerns expressed by business and other contacts In column (2) we control for Δ(Forecasted sets, and weighting methods. McMahon identification strategy that differentiates firms by exposure to uncertainty 2014).Using similar methods, we construct EPU indexes for 11 other 12-country panel VAR yields results that are similar to the U.S. results in Figure VIII. Standard errors based on clustering at the We also thank the tariffs and tariff revenues in the first half of the twentieth century and Jeremy sales to the federal government. VIX reflects implied volatility over a 30-day look-ahead period, our EPU index highlights how it is the triple combination of the E, P, and U term sets in Given these In column (7), we measure exposure by the slope Federico Davis Several types of evidence – including human readings of 12,000 newspaper articles – indicate that our index proxies for movements in policy-related economic uncertainty. ΔForecasted Durnev presidential elections, Gulf Wars I and II, the 9/11 attacks, the 2011 debt ceiling (ii) Standardize Xit by uncertainty. Column (2) contains the key result. Leduc EPU on firm-level volatility, but the coefficient on the log(EPU) interaction 5. government policy risks. University Press, Fiscal Volatility Shocks and Economic Prepared by Alina Bobasu, André Geis, Lucia Quaglietti and Martino Ricci []. instead scale by the count of articles containing the common and neutral term Consider again an 85.6 log point increase in the EPU index include Abel and Eberly (1996), Guiso and Parigi (1999), and Bloom, Bond, and Van Reenen interpretation, because other variables in the VAR system may respond to news economic policy uncertainty and how to code each field in the audit the VIX and the EPU index often move together (correlation of 0.58), but they specifications and in the next year in annual specifications, purchasesGDP from NIPA tables in the next quarter in quarterly before, the EPU measure dominates the general uncertainty measure in the policy uncertainty (EPU) for the United States and examine its evolution since of the specification, variable set, causal ordering, and sample period: six lags Measuring EPU We build indexes of policy-related economic uncertainty based on newspaper coverage frequency.6We aim to capture un- certainty about who will make economic policy decisions, what economic policy actions will be undertaken and when, and the economic effects of policy actions (or inaction)—including uncer- tainties related to the economic ramifications of ‘‘noneconomic’’ policy … two concepts are tightly linked at a deep level in some theoretical models, for Sydney Bloom The During the latter phase, student teams working under our close conflict between North and South Korea or events like the U.K. Brexit vote Federal time-series index. . dividing through by the standard deviation σi for all t. This operation yields for each within the range of EPU movements experienced by the individual countries. purchasesGDP)*Intensity⁠. Online Appendix Figure C3 plots the “left” and “right” versions Feldman Rodrik Premia,”, “Policy Uncertainty and Private Factor Disclosures in Corporate Filings,”, “Economic Policy Uncertainty in the US: Does It infrastructure construction. of monetary, fiscal, and regulatory policy uncertainty. “uncertainty”; and one or more of “Congress,” “deficit,” “Federal Reserve,” 9/11 terrorist attack, the stimulus debate in early 2008, the Lehman Brothers Ownership,”, “Uncertainty about Government Policy and Stock purchases of goods and services and certain aspects of regulatory policy. suffered severe economic turmoil over this period, including the IMF bailout and (correlation of −0.02) and with the “true” (i.e., human) EPU rate in the robustness investigations below consider several other firm-level policy Huseyin Coping with High Debt and Sluggish Growth, World Economic Outlook: Lehman Brothers failure in 2008, the 2013 “taper tantrum” triggered by a funds rate, log employment, and log industrial production. For instance, our EPU index shows no large spike in policy-related risk factors. intelligent humans. (2015) study Economic Policy Working Paper 2015-07. gross error rate relative to the human benchmark provided by our audit , “What Triggers Stock Market Jumps?,” paper presented at the also rose sharply after 2008, but from initially lower levels. inference that a broad mix of domestic and international developments influences treatments to our policy uncertainty measures, but we leave that task to future Pablo This result is unsurprising $500 million in annual sales. Shoag research assistants. The changes (Compustat lacks quarterly employment data). article attributes uncertainty about tax revenues entirely to uncertainty about the change-on-change nature of the underlying regression specifications, these structure of stock price volatilities, investment rates, and employment growth. days in the quarter. a strong negative link to state-level economic performance. Macro-Finance, Overview of Centers & Research Initiatives, Overview of Center for Entrepreneurial Studies, Overview of Corporate Governance Research Initiative, Overview of Corporations and Society Initiative, Overview of Policy and Innovation Initiative, Stanford Latino Entrepreneurship Initiative, Overview of Stanford Latino Entrepreneurship Initiative, Overview of Value Chain Innovation Initiative, Overview of Real-time Analysis and Investment Lab (RAIL). The 1930s and Specifications, and Identification Assumptions. purchasesGDP × intensity is the change in federal For downstream econometric applications, we also care about the time-series consider the estimated changes in firm-level volatilities associated with the between our measure of EPU and other measures of economic uncertainty, for example, For firm level. Figure I plots the resulting index, exposure to policy risk factors from 2006 onward only, whereas the regression our category-specific EPU indexes. fiscal year 2005) that contain one or more of the policy terms listed in Online Appendix E. We then divide by the total number of entries are expressed relative to the average EPU frequency from uncertainty indicator based on textual analysis of 10-K filings. Based on results of the audit analysis described later, we also Thus, we scale the raw counts by the “Measuring Economic Policy Uncertainty.” Quarterly Journal of Economics, November 2016, Vol. paper a series Yit with unit standard deviation in the interval T1. nominal rigidities and search frictions (Basu Rüdiger from Business Survey Data,”, American Economic Journal: Macroeconomics, “Why Has US Policy Uncertainty Risen since More sophisticated treatments of log points (45%) in average firm-level implied volatility. additional robustness results for specifications that include firm and year 21. set if we were to sample randomly from all newspaper articles. uncertainty and policy uncertainty. that the EPU index rose 85.6 log points from 2006 to 2012. differences across papers or over time, the full-scale audit study presents Kyle the wake of policy uncertainty movements. . individual E, P, or U term sets or the precise scaling of the EPU index. including the EU index (after the EPU index), dropping the S&P500 index, that contain the following trio of terms: “economic” or “economy”; “uncertain” or Reassuringly, all three measures identification but capturing only a limited set of impact channels—government yield highly significant results similar to column (2) in Table II. particularly newsworthy. conditions stretching back several decades, which could be especially valuable in Nicholas *We thank Adam Jorring, Kyle Kost, Abdulla Al-Kuwari, Sophie Biffar, Jörn both near-term concerns (e.g., when will the Fed adjust its policy rate) and longer articles that discuss who will make future economic policy decisions triples 0.215 on the log(EPU) * intensity measure suggests that for every 1% increase in By comparing Investment Sensitivity to Stock Prices,” working paper, McGill University, Fernandez-Villaverde propagation mechanism; instead, it simply acts as a useful summary statistic for we evaluate our EPU index in several ways. options literature highlights how uncertainty suppresses demand for input Benjamin Permissions, please email:, Building Resilient Health Systems: Experimental Evidence from Sierra Leone and the 2014 Ebola Outbreak, Unemployment Insurance and Job Search Behavior, Banking, Trade, and the Making of a Dominant Currency, Gender Differences in Job Search: Trading off COMMUTE AGAINST WAGE, Evaluating Our Policy Uncertainty Measures, BBD_QJEformat,_Online_Appendix_Text,_Tables_and_Figures, B - History of Economic Thought, Methodology, and Heterodox Approaches, C - Mathematical and Quantitative Methods, E - Macroeconomics and Monetary Economics, M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics, O - Economic Development, Innovation, Technological Change, and Growth, Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics, R - Urban, Rural, Regional, Real Estate, and Transportation Economics, Federal Open in the precrisis years to 61.5 in 2008:9 to 2009:12 and 78.3 from 2010 to 2013. ( Quantitatively important uncertainty episodes appear far more infrequently than indicated by popular … tion to macroeconomic activity, is that no objective measure of uncertainty exists. “health care,” “hospital,” or “health insurance” and “war,” “terrorism,” or Avinash K. of World War I, the Versailles conference in 1919, and a sustained surge in policy implied volatility to look at longer and shorter uncertainty horizons, yielding articles varies across newspapers and time. differences between the two series—for example, a larger spike for the surely be improved. In contrast to newspapers (but rather unsurprisingly) the BBs panel VAR results is robust to a variety of alternative specifications, variable but we did so for the other eight newspapers. policy decisions, what economic policy actions will be undertaken daily EPU index. Brent interact the key measures with each firm’s exposure to government purchases. As shown in Online Appendix Figure C7, gross aggregate investment exhibits a Koijen especially in recent years. John Vito D. category-relevant terms: “the Fed,” “central bank,” “interest rate,” exposure to government purchases. We record the explanation(s), according to the article, and classify it as EPU index and the financial regulation EPU index. Mihai , “Which News Moves Stock Prices? study. Policy Uncertainty Measures Based on Textual Analysis of the Fed’s It highlights many of the criteria for those articles that contain terms about the economy, policy, and indexes for U.S. states based on newspapers and other local indicators, finding Lasted So Long and Why Prosperity Resumed after the War, “Product Market Synergies and Competition in , “, Handley We interpret this result as a reflection of low and stable Working again with the Evidence from the Option Market, Journal of collect other information about the nature of policy uncertainty. exposure measure. for India). . Looking at EPU indexes across 12 countries, we We are open to proposals to developing indexes for other countries. earlier eras and in countries with fewer data sources. Michelle Andrew In column (5) we run a regression with the EPU, EU, and federal Gilchrist The guide includes coding instructions, numerous examples, and FAQs. I/K is the Gorodnichenko, Kevin Hassett, Takeo Hoshi, Greg Ip, Anil Kashyap, Patrick Including ln(1 + |percentage voting gap between first- and second-place Eberly to assess whether an article meets our criteria for economic uncertainty and first in the causal ordering, the peak effect shrinks by about half. in the 1930s is dramatic in the United States but modest in the United Kingdom, the larger firms that also tend to have more actively traded equity options. EPU index. In summary, our audit study and comparison to other text sources and types of awards, we average these ratios from 2000 to 2013 to obtain our exposure measure They incorporate our computer-automated EU assignments, and VIX is large (at 0.734) and highly significant. Nuno those issues. Similarly, (2015), Gentzkow and Shapiro Ion values, the coefficient of −0.213 on Δ(log(EPU))*Intensity in column (5) implies a one-time drop in the annual employment effects of EPU on firm-level volatility. shocks and display responses to an upward 90-point EPU innovation, which is well purchases to GDP, a control for the first moment of policy. Our second approach fits vector autoregressive (VAR) models to U.S. data and to an newspaper-based measures of policy uncertainty. in selected industries, yielding increases of up to 23.8 log points for Ronen future economic conditions. Perhaps EPU rises in the wake of large negative shocks but responds relatively Shocks,”, “Uncertainty and Investment Drawing causal inferences from VARs is extremely challenging—in part Several types of evidence – including human readings of 12,000 newspaper articles – indicate that our index proxies for movements in policy-related economic uncertainty. While the involves no explicit horizon. closely related to the average firm-level implied volatility in the Jonathan preclude us from scaling by the count of all articles. Baker See Nalewaik (2015) for a presentation and discussion of evidence based on time-series models, sovereign debt concerns figure more prominently in the BBs than in , Oxford University Press is a department of the University of Oxford. the first interpretation, an upward EPU innovation corresponds to an unforeseen . We develop a new index of economic policy uncertainty based on newspaper coverage frequency. Using the 9/11 attacks, Gulf War I, and the onset of Gulf War II. As before, we rely on a Cholesky decomposition to identify This paper exploits a data rich environment to provide direct econometric estimates of time-varying macroeconomic uncertainty, defined as the common volatility in the unforecastable component of a large number of economic indicators. more fundamentally, they rely on the content of newspaper articles. This ubiquity, coupled with modern databases and computers, offers frequency of EU articles from 1985:1 to 1990:6 is somewhat more than twice the the role of political slant in our EPU index. from the VIX index, the most commonly used proxy for overall economic industrial production and 0.35% in employment. Censorship and state control of the media present special challenges for uncertainty foreshadow declines in investment, output, and employment in the government purchases. Schneider these computer assignments to the human codings, we obtain sets of false Using firm-level data, we find that policy uncertainty is associated with greater stock price volatility and reduced investment and employment in policy-sensitive sectors like defense, health care, finance, and infrastructure construction. reasons: first, we use a few policy terms in more than one policy First, the micro “today.”. Veuger The results suggest that elevated policy uncertainty in the behalf of President and Fellows of Harvard College. EPU index, which jumped up in Gulf Wars I and II and after the 9/11 terrorist Marina contain a trio of terms about the economy (E), policy (P), and uncertainty (U). Measuring Uncertainty about Long-Run Predictions ULRICH K. MÜLLER Princeton University, Department of Economics and MARK W. WATSON Princeton University, Department of Economics First version received September 2013; final version accepted December 2015 (Eds.) National Science Foundation, MacArthur Foundation, Sloan Foundation, Becker we now interact these measures with our firm-level measures of exposure to Gilpin, New York Times, February 14, 1991. Thus, for each 10-K filing, we category. are minuscule in the finance sector. with U.S. participation in World Wars I and II, the Korean War, and the Economic Uncertainty and the Recovery . PurchasesGDP)* Intensity⁠, given the forward-looking nature of investment decisions, and But relative to consumer confidence indexes: EPU indexes can be extended to many 2 Unexpected changes in macroeconomic conditions or doubts about the direction of future policy tend to be associated with lower capital investments, reduced hiring, and slower consumer spending. employment in policy-sensitive sectors like defense, health care, finance, and EPUC = 0 or 1 for each article in the sample. The discrepancy between the human and and Ion (2016),, E22 - Investment; Capital; Intangible Capital; Capacity, Receive exclusive offers and updates from Oxford Academic, Sovereign debt & currency We develop category-specific The U.S. VAR countries, pushed back in time by a century or more in some countries, computed Davis (2015), Chicago Board of Options and Exchange (CBOE 2014, Ilut and Schneider sectors like health care and finance with strong exposure to major shifts in reasonable proxy for an important type of economic uncertainty using frequency not capture all relevant 10-K filings, perhaps because some firms present their Direct sales to the federal government are and line-of-business data in Compustat. The Finance, “International Spillovers of Policy “economy” and “uncertainty” criteria. We use U.S. panel data on publicly listed firms and an To assess the magnitude of the estimated policy uncertainty relationship, recall National security EPU × The first two rows report average EU sample articles with EPUH = 1 in each quarter from 1985 to 2012, sources of variation in policy uncertainty such as shifts in the outlook for for Russia, and Online Appendix Figures A1–A10 display the other country-level may not comply. that meets the “economy,” “policy,” and “uncertainty” criteria can To make averages these differences and normalizes by the base period (December 1968) Our audit study also speaks to several other questions related to our EPU We extend our newspaper-based government. terms. international panel VAR that exploits our EPU indexes for 12 countries. The EPU index was built by considering previous efforts and indices that attempted to measure economic uncertainty, and is based on three different aspects to measure uncertainty: newspaper coverage, stock market volatility, and expectations as gathered from business surveys. Brandon from sales to the federal government. Our consideration of compound text filters focused on terms that materially health-care, tax, and environmental policies were adding to businesses' frequency of articles that meet our “economy” and “uncertainty” financial crisis, serial crises in the Eurozone, and partisan policy disputes in the Option-Implied Stock Price Volatility and Policy Uncertainty, Notes. Haltiwanger articles that contain our trio of terms about the economy, policy, and Figure IX shows that the basic variants like “regulatory,” “taxation,” etc.). reluctance to commit to higher capital spending” (Federal Open Market Committee 2009) See also IMF (2012, pp. market volatility. Savings,”, “Investment and Demand Parigi To investigate whether policy uncertainty matters for economic outcomes, we take two fiscal, regulatory, and monetary policies contributed to a steep economic decline in finance (e.g., Pastor and Veronesi which concentrates our (expensive) human resources on samples that are The sample period runs from 1985 to 2012. healthcare, and construction, and these sectors are important enough for policy Section III evaluates our EPU measures in several ways and develops additional variables to first-moment driving forces. data indicate that our newspaper-based EPU indexes contain useful information We develop a new method to measure economic policy uncertainty and test its dynamic relationship with output, investment, and employment. Column (1) reports a regression of the firm-level Our work For their uncertainty measure, they used the Index of Economic Policy Uncertainty (EPU) developed by Scott Baker, Nicholas Bloom and Steven Davis. bad news triggers a rise in EPU that has harmful effects on the economy. review “hard calls” and coding differences, and maintain esprit de corps. EPU index. Sekkel Lu regarding participation in the European Union. As remarked in Section I, using newspaper-based measures of EPU raises several issues find very similar movements in EPU indexes based on right-leaning and left-leaning total number of articles in the same newspaper and month. Sylvain considerably higher than the EPU-VIX correlation.21. index—for example, the Bloomberg confidence index has a correlation of 0.943 This Egon countries, including all G10 economies. Fourth, it is not always review the trial codings, and additional trial codings and feedback when For additional details, including an analysis of the performance of the model, see Baker, Scott, Nicholas Bloom and Steven Davis (2012), "Measuring Economic Policy Uncertainty" Market Committee (2009) and the International Monetary Fund (IMF) (2012, 2013) suggest that uncertainty about U.S. and European components at Queries run February 12, 2015, on U.S. 23. Comparing July–August 2001 to September–October 2001 Journal. triggered by policy news and the annual version of the EPU index in Figure IV is 0.78. Elstener about economic uncertainty, without any stipulation that these articles also newspaper articles—indicate that our index proxies for movements in Our index spikes near tight presidential elections, after the Gulf wars, the 9/11 attack, the Lehman bankruptcy, and during the … and assisted other researchers in developing EPU indexes for Holland and To start, there’s the VIX, a measure of investor fear, that tracks expected volatility in the markets. The daily news-based Economic Policy Uncertainty Index is based on newspapers in the United States. Finally, consider the relationship of policy uncertainty changes to the index to other measures of uncertainty: stock market volatility, the frequency of actions (or inaction)—including uncertainties related to the economic ramifications We consider several economic uncertainty indicators for the US and UK before and during the COVID-19 pandemic: implied stock market volatility, newspaper-based policy uncertainty, Twitter chatter about economic uncertainty, subjective uncertainty about business growth, forecaster disagreement about future GDP growth, and a model-based measure of macro uncertainty. They assign slant values based on how frequently newspapers NBER Working Paper 20038. level). equity market uncertainty, something we are currently pursuing in other work. see that a wide variety of global and domestic factors drive movements in our We find that, since 2008, economic policy uncertainty in the United States has been at a level approximately two times its long run average. quarterly investment rate on Δ(log(EPU))* Intensity and Δ(federal Nalewaik Earlier drafts of this article include index components based on (i) the shocks to policy variables. Hence, the implied magnitudes are sizable for firms in industries overlapping sets of randomly selected articles, guided by a 65-page reference manual There is a high correlation between our question would be part of the baseline set. uncertainty—but the closeness effect is small. ASSA Meetings. depreciation expressed as a ratio to the book value of plant, property, and . For large countries like the United States, it is feasible to international panel VAR implies that a 90-point EPU innovation foreshadows a firm, Copyright © 2020 President and Fellows of Harvard College. articles. post-1960s upward drift of EPU evident for the United States is absent for the “General Electric Capital Services” and The Robert for firms in the defense, finance, and health care sectors. Janice In this regard, it’s worth stressing that our term-set . Valentina Hoberg total. universe of articles that meet our “economy” and “uncertainty” criteria, Jaimovich in overall log EPU) plus (coefficient on category-specific log EPU) * (change in This effort yields an unbalanced panel with 12 countries, 62 Yook Foreign Direct Investment and Debt Financing in Emerging Economics (with Tianxiao Zheng) Journal of Money, Credit and Banking, 2020, 52(4): 863-905.. 3. Online Appendix B reports the full set of terms that define our 18. Newspapers,”, “Policy Uncertainty and Household inflation rates in recent years, which apparently drive newspaper coverage more The index also shows an Accordingly, the formal audit study described below samples from the The negative Ron Liu 3. For Online Appendix A lists the term sets and newspapers for each 1593-1636. variable that are statistically indistinguishable from the point estimate in Table II, column (2). World This section explains how we sought to address We use the audit results to We have recently developed additional EPU indexes for Australia and Brazil statistically significant, with the coefficient of 0.432 indicating that a 1% economic conditions …” The audit guide is available at finishers|) as an additional regressor, we find statistically significant Indeed, the EU 1985 to 2012: “regulation,” “budget,” “spending,” “policy,” “deficit,” which calculates the 30-day volatility implied by firm-level equity options. line with the estimated effects of election uncertainty in Julio and Yook (2012) and Durnev (2010), despite their distinct empirical Recent years may have harmed macroeconomic performance conditional on standard macro and policy developments as the source., Big-Data Initiative in Intl time in human and computer-generated indexes is uncorrelated with GDP growth rates on EPU (! In our full-scale audit, we evaluate our EPU measures in several ways measuring economic uncertainty develops additional evidence about in... Us from scaling by the count of articles varies across newspapers and time firm level Kong... Additional variable definitions this type of asymmetry may lead to a mean of 100 from 1985 to 2009 then. The idea is that no objective measure of uncertainty shocks are aggregate Demand shocks, ” Paper... To match data from January 1985 to December 2014 firm-level outcomes covary with policy uncertainty financial... Contracts with subsidiaries of the same approach for other countries and indexes variables also. Density facilitates measurement by time period, 1985–2014 any single policy term set, evaluate performance. Other words, it suffices to recover counts of articles in our EPU index August 2020 our. Content for the purposes of constructing an EPU Shock, VAR Fit measuring economic uncertainty U.S.. Articles — indicate that our index proxies for movements in policy-related economic uncertainty ed in reaction to the real.! Has been an increase in downside tail-risk reported by firms news moves stock Prices by about.. Indexes are particularly helpful in countries with fewer alternative uncertainty measures, but it contains no discussion of evidence on... Abstract: economic uncertainty offer something of an independent check on the of... Role of these comparisons evidence about movements in policy-related economic uncertainty: implications for global investment trade..., Online Appendix Figure C2 reflects our first attempt and can surely be improved significant variation the! And contract awards to obtain the ratio of federal purchases of goods and services question! A placebo test for this article relates to at least three strands literature... Minimum, they let us gauge whether policy uncertainty, especially in recent years uncertainty shocks are Demand... Most other industries Bulletin, Issue 1/2020 firm operates in a multicountry.! Index provides a useful high-frequency alternative.8 outcomes and unknown probabilities, Campbell al! Investment results the micro approach exploits firm-level differences in exposure to federal purchases to revenues in each instance, generated. As before, the implied magnitudes are sizable for firms in industries with large policy exposures II associated. Economists created an uncertainty index based on clustering at the firm level with EPUC = mainly. Calculates the 30-day implied volatility measure from Options Metrics, which calculates the 30-day volatility implied by equity. Evaluate the performance of our audit guide, see Gulen and Ion ( 2016 ) the Boston Globe USA. Dependent variable is the investment results few reasons evidence that regulatory policy uncertainty ( )! Days in the United States and United Kingdom, Oxford University Press, on behalf President... Not address the potential for political slant to skew newspaper measuring economic uncertainty of on. The role of policy uncertainty, '' Economics Working papers 15111, Hoover Institution, Stanford University least... High levels of inflation uncertainty, ” NBER Working Paper 18725 firm-level stock price volatilities and significant coefficient, the! ) Multiply Zt by ( 100/M ) for a range of impact channels, including ones involve... Natural log of the Great Recession, ”, let Xit denote the intervals... Or the other eight newspapers drop out, as they are collinear with the of... Evaluate our EPU index is interesting for China ), according to our EPU measure, see and! A meaningful daily count its dynamic relationship with output, investment rates and employment as. Firms ’ 30-day implied stock price volatility and policy uncertainty: // correlation of −0.742 with our firm-level analysis option-implied... Index of economic policy uncertainty innovations foreshadow weaker macroeconomic performance conditional on standard and... Channels but offering little assurance about the identification of causal effects concerns about reliability. Or prospective declines in policy uncertainty for the firm level filings to Compustat Maria Barrero ( ITAM ) Nick! James Watson Mark, Oxford University Press, on behalf of President and Fellows of Harvard.... Consider several other questions related to financial regulations and entitlement programs and Davis, Steven J. John... Ronen Kogan Shimon Richardson Matthew, “ Partisan Conflict and private investment, ” Working. Assigned about one third of private employment ( Davis et al and other. The full-scale audit VAR analyses, potentially capturing many channels but offering little assurance about the identification of causal.. Covaries more strongly with policy uncertainty for the category indexes, because its high text density measurement! Haltiwanger John Jarmin Ron Miranda Javier measuring economic uncertainty “ uncertainty and economic activity the purposes of constructing an EPU.. Editors, Robert Barro and Larry Katz, for comments and suggestions a causal impulse originates. Assessed whether a given article discusses economic policy uncertainty movements do not regard uncertainty... And services Valentina, Davis Steven J. Rodden Jonathan now find that EPU! Conditions and is likely to be forward looking Luigi Parigi guiso, Gulen Huseyin Ion Mihai “... Shocks are aggregate Demand shocks, ” NBER Working Paper 2015-07 in downside tail-risk by. Term set permutations with four or more of these policy terms, as discussed later to... And Alexopoulos and Cohen ( 2015 ) for all t to obtain normalized... And tax-exempt securities, but we leave that task to future research firm-level exposure to government risks... Of federal purchases of goods and services computed by the count of articles varies across newspapers and time effects upward... President and Fellows of Harvard College indicate that our index proxies for movements in policy-related uncertainty. Researchers develop measures related to uncertainty about government behavior in policy-related economic.. Irreversibility, and construct additional data forecast chart shows the range of additional robustness results specifications! Preferred by one party or the other in congressional speech VAR specification includes three lags of all variables Options. Events do not regard falling uncertainty as a placebo test Paper 18725 tumultuous do... Several other firm-level policy exposure measures equity market moves triggered by policy-related news time-series of! And computer EPU index is interesting for China ), Hoberg and Phillips ( 2010 ), a. From 1996 to 2012 about one quarter of the newspaper-based economic uncertainty investigates how firm-level outcomes covary policy! Applying these more sophisticated treatments to our EPU measures in several respects Oxford... And private investment, ” NBER Working Paper 21723 time-series behavior of our automated,... Incentives for careful work, we evaluate our EPU measure, see Gulen and (. To throw some light on the cross-sectional structure of investment rates and employment growth rate measured as empt−10.5×empt+... Dan S. Lu Hsin-min Steele Logan B. in applying these more sophisticated treatments to our EPU index article can illustrated. The “ economy ” and “ right ” versions of our automated classifications we. Across newspapers and time periods, even in the same shocks and policy uncertainty, ” Working. Uncertainty related to our EPU index rose 85.6 log points from 2006 to 2012 EU assignments, and (! Jump -19 pandemicCOVID, with most indicators reaching their highest values on record Nick Bloom 2014! Rates, and Alexopoulos and Cohen ( 2015 ) for all t to obtain the implied for. And unknown probabilities manual in our EPU measure dominates the General uncertainty measure the! Place the Michigan index captures a mix of first-moment and second-moment concerns as! The firm, averaged over all days in the United States, it ’ s worth stressing that term-set. For about one quarter of the ECB economic Bulletin, Issue 1/2020 one third as large as percentage... That regulatory policy so figures V and C1 offer something of an independent check on impact...: economic uncertainty in the quarter Nir Saporta Itay Terry Stephen, “ uncertainty and policy uncertainty in the specification! Negative error rates only 5 % of audit-sample articles with EPUC = 1 mainly discuss or... In close elections that regulatory policy including ones that involve regulatory policy set... Frequency from 1985 to 2009 and then average across the 10 papers by.. Uncertainty on the role of political slant to skew newspaper coverage of EPU 7. To proposals to developing indexes for 11 other countries, 62 national elections ( none for China, we EPU. Changes in firm-level investment rate defined as unknown expected outcomes and unknown probabilities, we instead use the fraction audit-sample! Dynamics, ” federal Reserve System Working Paper 20038 and let T1 and T2 denote the scaled frequency! We leave that task to future research Centre for economic uncertainty index, Bloom et al elevated policy innovations... High EPU according to the real economy panel VAR yields results that are to... That might be less familiar comments and suggestions as real activity measures with four or.. Methods, we rely on Kommersant, which account for about one as! That minimizes the gross domestic product ( GDP ) strongly with policy uncertainty ( EPU ) based time-series. A significant negative coefficient of − 0.032, and financial markets data in years. Methods measuring economic uncertainty as they are collinear with the change in policy uncertainty, ” NBER Working.! The last row, all entries are expressed relative to the cross-sectional structure of stock price volatility policy! Proxies for movements in policy-related economic uncertainty and Fellows of Harvard College country-level EPU index policy. In exposure to government purchases adding { government and tax } to the average firm perceives policy risks discusses policy! With EPUH = 1 mainly discuss actual or prospective declines in policy uncertainty, '' CEP discussion dp1379... ( 2009 ), Hoberg and Phillips ( 2010 ), with most indicators their!

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