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A new economic policy uncertainty index for Spain

Author

Listed:
  • Corinna Ghirelli

    (Banco de España)

  • Javier J. Pérez

    (Banco de España)

  • Alberto Urtasun

    (Banco de España)

Abstract
We construct a new Economic Policy Uncertainty (EPU) index for Spain, building on the influential methodology of Baker, Bloom and Davis (2016), and compare it with the EPU for Spain that these authors provide. We refine the index in several dimensions: we expand the headline newspaper coverage from 2 to 7, including economic-financial ones, use a much richer set of keywords to form the search expressions, and cover a longer sample period. Two results stand out: (i) the new index presents a more consistent chronology of economic policy events; (ii) the macroeconomic effects of uncertainty shocks identified from the new index yield significant negative responses of GDP, private consumption and private investment, compared to mute responses obtained using the original one. Beyond the results for the Spanish case, our results suggest that, in addition to the richness of the keywords in the search expressions, widening the press and time coverage is key to improve the quality of the aggregate EPU index.

Suggested Citation

  • Corinna Ghirelli & Javier J. Pérez & Alberto Urtasun, 2019. "A new economic policy uncertainty index for Spain," Working Papers 1906, Banco de España.
    • Handle: RePEc:bde:wpaper:1906
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    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/19/Fich/dt1906e.pdf
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    More about this item

    Keywords

    economic uncertainty; policy uncertainty; uncertainty shocks.;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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