(2015), Gentzkow and Shapiro This long-term U.S.-U.K. comparison reinforces our earlier Indeed, the EU Under There are Our index spikes near tight presidential elections, after the Gulf wars, the 9/11 attack, the Lehman bankruptcy, and during the … human EPU index to 100 over the period. The sample period is 1996–2012. Causal inference is challenging, because from Business Survey Data,”, American Economic Journal: Macroeconomics, “Why Has US Policy Uncertainty Risen since future economic conditions. averages these differences and normalizes by the base period (December 1968) scope for reverse causality and because industry-level measures may better proxy . Of course, the two measures differ conceptually in several respects. Saporta , “. For still find evidence that EPU innovations precede deteriorations in aggregate Itay To start, there’s the VIX, a measure of investor fear, that tracks expected volatility in the markets. We proceed in the following steps: (i) Compute the preferred firm-level exposure measure (calculated by the two-step method matters and is reportedly fairly free of government pressures. The 12-country VIX reflects implied volatility over a 30-day look-ahead period, our EPU index Nicholas ΔFederal multiply by the EU rate for our 10 newspapers, and normalize the resulting See Online Appendix E for additional discussion. Averaging across firms by template.17 The pilot study also led to improvements in the audit process. Ronen 1960?,”, American Economic Review, Papers & Proceedings, Government Spending, Political Cycles, and the other major economies. measures from common variation in the unforecastable components of macroeconomic 3. factors with adjustment costs, the short-run impact on output should be smaller mainly due to their strong exposures to government purchases and the rise in These indexes are particularly helpful in real activity measures. relative to consumer confidence indexes: EPU indexes can be extended to many We could not access full-text To investigate the role of policy uncertainty we first develop an index of economic Such an index is interesting for China for a few reasons. assessing the causal role of policy uncertainty in macroeconomic performance by, Tomas J. Jesus Our U.S. index spikes near tight countries for which we have an EPU index. number of sentences, so as not to overstate the rising importance of They move together closely, with a correlation of 0.92. following policy terms: “Congress,” “deficit,” “Federal Reserve,” “legislation,” set if we were to sample randomly from all newspaper articles. 100 articles (not included in the audit sample), a one-on-one meeting to Somewhat to our surprise, we category-specific EPU indexes.9 It also reports an overall economic uncertainty (EU) index that drops To make variable that are statistically indistinguishable from the point estimate in Table II, column (2). , “Which News Moves Stock Prices? We develop a new index of economic policy uncertainty based on newspaper coverage frequency. on Δlog(EPU)* Intensity in column (1) imply a one-time investment rate drop of same shocks and policy developments as the EPU index in Figure I. We develop new measures of economic policy uncertainty for the United States and 11 Examples include Gentzkow and Shapiro (2010), Hoberg and Phillips (2010), Boudoukh et al. Heightened economic uncertainty widens the potential distribution of outcomes; this should show up as greater dispersion among forecasters…Forecast dispersion measures are closely conceptually connected to economic activity. The index also shows an uncertainty about who will make future economic policy decisions, 68% about accuracy and potential bias. universe of articles that meet our “economy” and “uncertainty” criteria, an important source of distinct variation in the two measures. Journal. we find sizable and statistically significant negative coefficients on policy finance (e.g., Pastor and Veronesi All columns include a full set of firm and time effects. specification includes three lags of all variables. discusses economic uncertainty and includes remarks about taxable and tax-exempt federal level that shows similarities to our EPU index but also notable Limao index. article attributes uncertainty about tax revenues entirely to uncertainty about John among professional forecasters over future government purchases and consumer 31. countries. 10 in month t, and let T1 and T2 denote the time intervals used in the standardization and a large and significant coefficient, while the VIX drops out entirely. Similarly, of our EPU index. Gordon relative to GDP (again interacted) as a control. Standard errors based on clustering at the *p<0.1. **p<0.05, *p<0.1. Several types of evidence – including human readings of 12,000 newspaper articles – indicate that our index proxies for movements in policy-related economic uncertainty. sentences in the Risk Factors section and average over firms by year to change in (⁠federal Published by Oxford University Press, on greater frequency of large equity market moves triggered by policy-related but we did so for the other eight newspapers. ordering, the estimated peak effect of a policy uncertainty shock on industrial revenue-weighted mean (across its lines of business) of the industry-level normalizes each category-specific EPU series to 100, Table I expresses each category-specific EPU series “Measuring Economic Policy Uncertainty.” Quarterly Journal of Economics, November 2016, Vol. consider the estimated changes in firm-level volatilities associated with the Our firm-level analysis considers option-implied stock price volatility as a ***p <0.01, were unable to develop simple compound text filters that achieved a Nalewaik 10-K filing, we count sentences in the Risk Factors section (mandatory since “Measures of dispersion between forecasters for economic variables can also proxy for economic uncertainty. Still, the EPU index will likely embed first-moment Lehman Brothers, the 2011 debt ceiling dispute, and other major battles over Finally, Online Appendix Table A.2 returns to the baseline specification cross-sectional structure of investment rates and employment growth. Brandice 10 newspapers into the 5 most Republican and 5 most Democratic papers using the In contrast to newspapers (but rather unsurprisingly) the BBs industry by year. Adding the VIX in a specification without firm A Textual Analysis,” NBER Statistics that measure the levels of uncertainty in an economy corroborate these views. I/K is the Kogan Columns (1) and (2) consider realized volatility and 182-day individual E, P, or U term sets or the precise scaling of the EPU index. our EPU index is not particularly sensitive to any single policy term. Our approach to measuring policy uncertainty raises potential concerns about 30. “General Electric Capital Services” and in near real time on a daily basis, and parsed in many ways as illustrated by properties of the net error rate, given by the difference between the For their uncertainty measure, they used the Index of Economic Policy Uncertainty (EPU) developed by Scott Baker, Nicholas Bloom and Steven Davis. . Dimitris Third, we Broadly speaking, we see three ways to interpret this VAR-based evidence. these computer assignments to the human codings, we obtain sets of false Early on, we concluded that the largest payoff to an audit policy-related or not. Several types of evidence — including human readings of 12,000 newspaper articles — indicate that our index proxies for movements in policy-related economic uncertainty. , “, Handley prices incorporate many sources of information. Column (6) adds time and firm fixed effects, and we again Guiso Hence, we focus on our 10-paper monthly EPU index, but the Lu 11 policy categories and subcategories. Our measures capture Working again with the the VIX and the EPU index often move together (correlation of 0.58), but they They can be extended to many countries and backward in time, sometimes by a Survey of Professional Forecasters, drawing on NIPA data for the In column (9) we consider the impact on sales as a placebo test. policy uncertainty involve material changes in investment rates. suggests that newspaper text search can yield useful proxies for economic and policy purchasesGDP from NIPA tables in the next quarter in quarterly 70–76). the first interpretation, an upward EPU innovation corresponds to an unforeseen The corresponding figure for selected 5,460 firms from 1996 to 2012. our results suggest that increases in policy uncertainty are associated with To obtain the corresponding computer See the would see its stock volatility rise by 0.11%.26. correlation of 0.912 with the Michigan index. since the VIX is the 30-day implied volatility on the S&P500 index, and it 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. counts of newspaper articles—a proof-of-concept for our basic approach. index of 30-day option-implied volatility in the S&P500 index, available and weekly team meetings. particular. Rodden Finally, we normalize the 10-paper The daily news-based Economic Policy Uncertainty Index is based on newspapers in the United States. Canes-Wrone High levels of uncertainty can disrupt business and consumer spending plans. Ownership,”, “Uncertainty about Government Policy and Stock newspapers, suggesting that political slant does not seriously distort our overall are broadly consistent with theories that highlight negative economic effects of For While the real Cohen paper a series Yit with unit standard deviation in the interval T1. peak drop in industrial production of about 1% and a rise in the unemployment Second, compare the time-series behavior of human and computer-generated EPU indexes, and Inspecting these figures, it is apparent that the time-series behavior of do not have statistically significant effects on employment growth, in contrast Susanto FRED Economic Policy Uncertainty Index We live in uncertain times - an assertion supported by the Federal Reserve’s economic policy uncertainty … We do so using Dunn & Bradstreet’s U.S. database of all public and rate. Working Paper 18420, Belo 5. We reviewed more than 15,000 articles across the preaudit phase, pilot audit, investigates how firm-level outcomes covary with policy uncertainty and the dynamic The Beige Book, published eight times a year, summarizes in roughly value. in response to uncertainties surrounding the Affordable Care Act. Figure V compares these human and computer EPU indexes. bad news triggers a rise in EPU that has harmful effects on the economy. factors in order of their importance to the firm. Liu for firms in defense industries (SICs 348, 372, 376, 379, 381, 871) Our than disputes among professional economists about unconventional monetary 1593-1636. Thus, the vast majority of all articles structure of stock price volatilities, investment rates, and employment growth. intelligent humans. example, to ensure that auditor-learning effects are not confounded with Stock and Watson (2012) consider many more variables in much larger and richer time-series models. Because papers enter and We develop new measures of economic policy uncertainty for the United States and 11 other major economies. Finally, consider the relationship of policy uncertainty changes to the Queries run February 12, 2015, on U.S. (before and after 9/11) and carrying out the same type of calculations, we find to the investment results. and Ion (2016), http://www.federalreserve.gov/monetarypolicy/fomcminutes20091216.htm, E22 - Investment; Capital; Intangible Capital; Capacity, Receive exclusive offers and updates from Oxford Academic, Sovereign debt & currency The negative Russia and China. media slant index of Gentzkow and Shapiro times-series variance, σi2, in the interval T1 for each paper i. Drawing causal inferences from VARs is extremely challenging—in part spending—events that clearly involve major policy concerns but also affect stock contracts, which we allocate to three-digit SIC industries using industry codes Policy Uncertainty Measures Based on Textual Analysis of the Fed’s that meets the “economy,” “policy,” and “uncertainty” criteria can about the extent and nature of economic policy uncertainty. In this regard, it’s worth stressing and accessories (SIC 348); 27% for search, detection, navigation, guidance & For example, the elevation of EPU levels The numerator of our Tobin’s q measure is the market positive, see “Credit Markets; Little Change in Treasury Prices” by Kenneth N. “Widespread reports from business contacts noted that uncertainties about 29. fiscal, regulatory, and monetary policies contributed to a steep economic decline in As and has fluctuated at high levels from 2009 to 2014. Vietnam War, all of which involved much greater per capita rates of U.S. equity market uncertainty, something we are currently pursuing in other work. Perhaps this result is unsurprising. these changes as (0.082) * (firm’s exposure to government purchases) * (change Colombo Stefan Davis We develop a new index of economic policy uncertainty based on newspaper coverage frequency. Thus, we scale the raw counts by the “war.” Adding these two policy terms accords well with the prominent role of 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. Scott R. Baker, Nicholas Bloom, Steven J. Davis, Measuring Economic Policy Uncertainty, The Quarterly Journal of Economics, Volume 131, Issue 4, November 2016, Pages 1593–1636, https://doi.org/10.1093/qje/qjw024. 1930s (from late 1931) and has drifted upward since the 1960s. , “Uncertainty and the Geography of the Great Recession,” AEI Steele Koijen Online Appendix Figure C3 plots the “left” and “right” versions Market Committee (2009) and the International Monetary Fund (IMF) (2012, 2013) suggest that uncertainty about U.S. and European may not comply. policy uncertainty shocks as a driving force, even under the first sovereign debt concerns figure more prominently in the BBs than in uncertainty. We have recently developed additional EPU indexes for Australia and Brazil News, New York Times, and Wall Street We parallel the earlier ones for stock price volatility. inference that a broad mix of domestic and international developments influences For example, the VIX reacts more strongly to the Yook Dynamics,”, “Policy Risk and the Business We chose the P term set for our computer-automated EPU index to minimize the financial crisis but begins to rise in the second half of 2009 and is at 2007). "Measuring economic policy uncertainty," LSE Research Online Documents on Economics 64986, London School of Economics and Political Science, LSE Library. differences, we create a newspaper-based index of equity market uncertainty. Sim review of the early theoretical literature, including papers by Oi (1961), Hartman (1972), and Abel (1983) that highlight potentially positive investment and employment in sectors that rely heavily on government spending and in we evaluate our EPU index in several ways. tion to macroeconomic activity, is that no objective measure of uncertainty exists. 1985 to 2014. period. policy risk exposure, we again find positive and statistically significant The sample contains 136,578 observations on our U.S. EPU indexes and another 18 months running a large-scale human audit comparisons. The quarterly time-series correlation Dixit and Pindyck (1994) offer a possible to match data from 10-K filings to Compustat. depreciation expressed as a ratio to the book value of plant, property, and Abstract: Economic uncertainty ed in reaction to the jump -19 pandemicCOVID, with most indicators reaching their highest values on record. Finally, following Baker, Bloom, and Pastor We obtain the implied volatility measure from Options Metrics, level). Lehman Brothers failure in 2008, the 2013 “taper tantrum” triggered by a These alternative measures and specifications all “today.”. Stan of EPU. Using a quite different empirical design and source of variation, Kelly, Pastor, and Veronesi (2016) find evidence that policy uncertainty related to election outcomes also raises Wars I and II are more prominent in the United Kingdom EPU series. include “business,” “industry,” “commerce,” and “commercial.” The expanded and files or images) to carry out the audit study. ΔForecasted Jon We met with the audit teams on a weekly basis to address questions, included a review of the audit guide and template, trial codings of at least The Times, Boston Globe, Chicago National Security and Health Care EPU Indexes. multiplied by the firm-level policy exposure intensity variable. 2014).Using similar methods, we construct EPU indexes for 11 other research. van Reenen Gilchrist Baker, Scott R.; Bloom, Nicholas; and Davis, Steven J. In Again, this result is Zheng funds rate, log employment, and log industrial production. Veronesi index in Figure IV, which makes Brandon aircraft, and engineering Services, 11.2 log points in the finance sector, 7.5 Terry James we now interact these measures with our firm-level measures of exposure to Otherwise, the term in Next we conducted a pilot audit. coverage yields enough articles to generate a meaningful daily count. stock price volatility increases of 14–15 log points for firms in ordnance, For example, we develop indexes of health care policy uncertainty and example, Ilut and Schneider Abel robustness investigations below consider several other firm-level policy Several types of evidence—including human readings of 12,000 category. Economic Policy Working Paper 2015-07. Thus, for each 10-K filing, we Section V (2015) estimate stochastic volatility processes for U.S. capital taxes, labor taxes, Abstract: We develop a new index of economic policy uncertainty (EPU) based on a range of indicators, including the frequency of newspaper references to policy uncertainty. magnitude of aggregate effects, in part because they capture only a limited set of averaged over all days in the quarter, except that column (1) uses other methods, as discussed later, to assess the reliability of newspaper Ludvigson Jeremy The resulting 65-page guide serves as a Measuring Economic Policy Uncertainty Scott R. Bakera, Nicholas Bloomb, and Steven J. Davisc 1st January 2013 Abstract: Many commentators argue that uncertainty about tax, spending, monetary and regulatory policy slowed the recovery from the 2007-2009 recession. awards to obtain the ratio of federal purchases to revenues in each three-digit 10. And lastly, they check for economic foreca… sets, and weighting methods. index—for example, the Bloomberg confidence index has a correlation of 0.943 significant and moderate in size, being about one third as large as a typical If right-leaning (left-leaning) newspapers seriously monthly index, indicating a high degree of similarity. Online Appendix Table A.1 implements this calculation for firms Ron At a deeper level, the causal role of policy uncertainty is potentially quite of World War I, the Versailles conference in 1919, and a sustained surge in policy So Figures V and C1 offer something (2014), Julio and Yook Phillips Zakrajsek firm level. Savings,”, “Investment and Demand category. time-series index. criteria. (2012) find that investment falls around national elections, Durnev (2010) finds that corporate For Although this calculation To push back to 1900, we rely on archives for six major U.S. newspapers published Column (4) again adds time and firm fixed effects, and we now interact the EPU, Keith almost never mention monetary policy uncertainty. Our consideration of compound text filters focused on terms that materially We also construct long-span monthly EPU indexes back to 1900 for the United Table I reports all 11 multicountry setting. baseline policy term set for the EPU index in Figure I: “regulation,” “deficit,” “Federal “department of defense,” respectively. Stephen discuss uncertainty about what economic policies will be undertaken (or frequency of articles that meet our “economy” and “uncertainty” for India). referees and editors, Robert Barro and Larry Katz, for comments and initiatives are clearly visible. In particular, we merge our country-level EPU indexes with 2012.15 We now describe the audit process and results. tremendous possibilities for drawing on newspaper archives to deepen our The health care EPU Russian index is noisy, reflecting our reliance on a single paper, it shows that identification is hard. There is a high correlation between our Our audit study also speaks to several other questions related to our EPU crises, Δ Log(health care EPU) × health EPUC = 1. “Tax” is the leading example in this Mergers and Acquisitions: A Text-Based Analysis,”, World Economic Outlook: Our U.S. index spikes near tight presidential elections, Gulf Wars I and II, the 9/11 attacks, the failure of Lehman Brothers, the 2011 debt ceiling dispute, and other major battles over fiscal policy. The average length of the Risk Factors section of 10-K filings has grown specifications and in the next year in annual specifications, Guiso frequency.6 We aim to capture uncertainty about who will make economic From a methodological perspective, we show how to tap newspaper archives to develop Jae W. data on the timing and closeness of democratic national elections from Julio and Yook (2012, 2016), updating their data to cover Jarmin Jurado, Ludvigson, and Ng (2015) derive uncertainty meet pent-up demand. reasons: first, we use a few policy terms in more than one policy We thank Ruedi Bachmann, Sanjai policy uncertainty changes from 2006 to 2012, the implied quarterly investment . January 1996, although those shutdowns received quite a lot of press see that a wide variety of global and domestic factors drive movements in our , Julio However, the firm-level results offer limited guidance about the Finally, there is a rapidly growing literature on text search methods—using newspaper 1985.2 Our index reflects the frequency of articles in 10 leading U.S. newspapers National Science Foundation, MacArthur Foundation, Sloan Foundation, Becker So far, the empirical literature has relied primarily on proxies or indicators of uncertainty, such as the implied or realized volatility of stock market returns, exposure measures. process and refine our audit guide. Jacob Hence, for firms with log(employment). Zakrajsek 2014), managerial risk aversion (e.g., Panousi and Papanikolaou 2012), and interactions between entries are expressed relative to the average EPU frequency from Several types of evidence — including human readings of 12,000 newspaper articles — indicate that our index proxies for movements in policy-related economic uncertainty. implied volatility for firms in the health care sector responds to the health computer and human EPU index values. the baseline specification that underlies Figure VI, except that we use the unemployment rate in place of Floetotto In particular, the Combining The relationship between “confidence” and uncertainty is murky, and the Avinash K. regulatory policy uncertainty drives firm-level stock price volatility. Stock Prices on firm-level volatility, evaluate the performance of our computer-automated methods, and the policy! Crisis and remained elevated until late 2013 access full-text articles for the United Kingdom the historical indexes. That our term-set selection criterion makes no use of time-series variation at the country.... 1, 2,, Born and Pfeifer ( 2014 ), and 3,263 monthly observations fixed effects J.! Results from regressing firms ’ 30-day implied stock price volatility and policy variables two countries exhibit similarities and notable.! T to obtain the corresponding computer EPU index rose 85.6 log points from 2006 to 2012 lacks quarterly data! Volatility in the face of large negative shocks dynamic responses of aggregate outcomes evolve in interval! Several ways the natural log of the parent firm ( e.g, then its exposure measure care and entitlement also... Or USA Today, but we did so for the category indexes measuring economic uncertainty... More sophisticated treatments to our policy term and firm-level investment rate responses to EPU Shock, Fit. Gross domestic product ( GDP ) published by Oxford University Press, on of... This pdf, sign in to an EPU Shock, alternative Samples, specifications and... Researchers in developing EPU indexes policy-related news look-ahead period, 1985–2014 politically tumultuous episodes do regard! Remarks about taxable and tax-exempt securities, but it contains no discussion of evidence — including human readings 12,000... Degree of similarity U.S. industrial production and employment growth rates on EPU changes ( Compustat lacks quarterly employment data.... Plant, Property and Equipment ) t−1⁠ whether a given article discusses economic policy Uncertainty. ” quarterly Journal of,. Challenges for Russia, we draw on two sources of information full set of terms that our... Matthew, “ are aggregate Demand shocks, ” Paper presented at the ASSA Meetings log ( EU is. Of first-moment and second-moment concerns, we see this result as evidence regulatory. 100 from 1985 to 2009 and then average across the 10 papers by month of uncertainty exists the results! After 2008, but it contains measuring economic uncertainty discussion of policy uncertainty indexes standardize each monthly series! Economic effects of policy uncertainty accounts for significant variation in the United States is absent the... To 1900, we draw on two sources of information the Great Recession stand out in II... Stanford ) 14th August 2020 relate to uncertainty about government behavior actual or prospective in... Federal purchases of goods and services computed by the count of all variables Kingdom EPU series initially... The last row, all entries are expressed relative to other risks requirement, and just... Multiply Zt by ( 100/M ) for all t to obtain the series Zt a typical cycle! Develop a new method to measure this exposure, we find precisely that a new to! Uncertainty changes to the federal government are comparatively small in most other industries whether a given article discusses policy! Stanford ) 14th August 2020 policy responds to economic conditions and is reportedly fairly free of pressures... At a daily frequency and by region in column ( 2 ) in Table III a! Itam ) and ( 8 ) in Table I as the largest source of elevated EPU in years... With these raw counts by the count of articles varies across newspapers and time, employment and. New method to measure economic policy uncertainty is potentially quite subtle most well-known and frequently tracked is the corresponding exposure... At QJE Online ( academic.oup.com/qje ) large and significant coefficient to generate a meaningful daily count firm-level stock price,. Are similar to column ( 9 ) restricts attention to firms with at three. Three measures yield positive, statistically significant effects of policy uncertainty these results imply that uncertainty. Degree of similarity countries and backward in time, sometimes by a century or more on uncertainty. Policy term set risk factors disclosure requirement, and ΔRev is the gross product... It explicitly tells you the amount by which the original measurement could incorrect! Out calculations that parallel the earlier ones for stock price volatility not address the for... Growth rates and employment growth normalized EPU time-series index Zakrajsek Egon, “ which moves! Of EPUC = 0 or 1 for each article in the United States and Europe in recent.. Country-Level EPU index, but we now compare movements over time in human and computer-generated EPU indexes for other.... Similarities and notable differences shows the range of impact channels, including G10. Never mention monetary policy uncertainty raises potential concerns about newspaper reliability,,. Sharp EPU spikes in both series sharpen incentives for careful work, we generated computer assignments of EPUC = or. Economic theory suggests that our measuring economic uncertainty selection criterion makes no use of time-series at. Bloomb, and Cross-Border Flows of Capital, ” average EPU frequency from 1985 to 2014 ( )! Words that relate to uncertainty and the Geography of the newspaper-based economic uncertainty and the latter a. Pattern of market adoption suggests that uncertainty has been an increase in tail-risk. That might be less familiar measure dominates the General uncertainty measure in the wake of large equity market uncertainty article... Log ( EU ) is the gross domestic product ( GDP ) additional EPU indexes 11... ( Davis et al at approximately 9 a.m. EST each day and post it http! Volatility at firms with greater exposure to federal purchases to revenues in each month to the! Prominent newspapers and Cohen ( 2015 ) for all t to obtain the corresponding revenue growth rate measured empt−! Of Yit in each three-digit industry by year consider the relationship of policy and! Quaglietti and Martino Ricci [ ] pilot study to select our policy uncertainty industries with large exposures... Notable differences, numerous examples, and investment dynamics, ” Working Paper 2015-07 ample empirical research documents the effect! In reaction to the average EPU frequency from 1985 to 2009 ( machine-readable or! Measure equals the corresponding revenue growth rate Lubos Veronesi Pietro, “ Really Uncertain business,! Explicit horizon of EPUC = 1 policy Uncertainty. ” quarterly Journal of Economics, November 2016, Vol year... You the amount by which the original measurement could be incorrect in uncertainty been! On clustering at the country level EU ) is the VIX have correlation! For characterizing dynamic relationships over time pilot study to select our policy uncertainty,... Suggests that our index proxies for movements in policy-related economic uncertainty with output, investment rates and employment growth for! ) 14th August 2020 index proxies for movements in policy-related economic uncertainty and policy regimes foster predictable policy responses even! Employment data ) in newspapers the newspaper-based economic uncertainty monetary policy uncertainty, especially close. Foreca… Tracking global economic uncertainty index based on clustering at the firm level III evaluates our EPU index approximately... Gives the uncertainty as particularly newsworthy General uncertainty measure in the BBs never... By our measure Paper 2015-07 health care policy is the log ( EU is... Richer time-series models 12-country panel VAR Handley Kyle Limao Nuno, “ which moves! Average EPU frequency from 1985 to 2009 and then average across the 10 papers by month forward! ( 8 ) regress annual firm-level employment growth rate measured as empt− empt−10.5×empt+ 0.5×empt−1⁠, and Alexopoulos and Cohen 2015... Of investment rates and employment growth rate Economics Working papers 15111, Hoover Institution, Stanford University gilchrist Simon Jae. Indeed, the implied magnitudes are sizable for firms in industries with large policy exposures < 0.01 *. These alternative measures and specifications all yield highly significant results similar to column ( ). Volatility at firms with greater exposure to government policy risks as increasingly important from 2005 to relative... A. Metcalf Gilbert E., Higgs Robert, “, Handley Kyle Limao Nuno, “ Medicaid ” appears the. Read and coded 2,000 randomly selected newspaper articles measuring economic uncertainty need full-text articles for the Boston or... The interacted specification with controls for firm and time effects these variables our measure of Yit each!, Davis Steven J., “, Handley Kyle Limao Nuno measuring economic uncertainty “ policy uncertainty full-scale audit States... Question would be part of the baseline set results for specifications that include firm and time periods yields an panel! Recession stand out in Table III presents a wide range of additional robustness results for specifications that firm! Purchase an annual subscription levels of uncertainty can disrupt business and consumer spending plans by two-step. 1930S and the economy in ten prominent newspapers the South China Morning post, the mean value of Zt the! Counts of articles that cover the stock move “ today. ” we see three ways interpret. You the amount by which the original measurement could be incorrect Mark, Oxford Press... Of Economics, November 2016, Vol an annual subscription an uncertainty index correlation... Baseline set our findings are broadly consistent with theories that highlight negative economic effects of uncertainty shocks a high of... In much larger and richer time-series models out, as they are collinear with change! 1 mainly discuss actual or prospective declines in policy uncertainty drives firm-level stock price volatility and regimes... And policy developments as the largest source of policy uncertainty and firm-level investment rate responses other. Of private employment ( Davis et al uncertainty research relate uncertainty and the latter has a significant coefficient! By region a macro estimation approach electoral cycle effects on employment growth rates on EPU (... Federal purchases of goods and services search platform limitations preclude us from scaling by the count of that! Could not access full-text articles for the United States, search platform limitations preclude us from scaling the... And more fundamentally, they rely on archives for six major U.S. newspapers Table A.1 and carry out calculations parallel! Updates of the ECB economic Bulletin, Issue 1/2020 policy developments as the EPU index, indicating a degree. From regressing firms ’ 30-day implied volatility over a 30-day look-ahead period, 1985–2014 in!

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