An Economic Policy Uncertainty Index for Portugal

Hugo Morão

No 2024/0322, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paperinvestigates the effects of policy uncertainty on major macroeconomicvariables in Portugal, employing a Structural Vector Autoregression (SVAR) approach. I develop an Economic Policy Uncertainty (EPU) index utilizing data from over twenty news sources, which captures key moments such as elections, budget negotiations, and various crises. In response to a rise in policy uncertainty, firms delay projects, leading to a decline in industrial output and a rise in unemployment. Consumers, in turn, reduce their non-essential spending, resulting in a gradual decline in retail sales. Onthefinancial side, rising policy uncertainty drives down equity prices and widens credit spreads, reflecting the concerns of investors and lenders.

Keywords: Economicuncertainty; Policyuncertainty; Uncertaintyshocks; Proxy-SVAR; Correlation restrictions; Textual analysis (search for similar items in EconPapers)
JEL-codes: C43 D80 E32 E65 E66 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-eur
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Citations: View citations in EconPapers (1)

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Journal Article: An economic policy uncertainty index for Portugal (2024)
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