Economics at your fingertips  

Economic policy uncertainty effects for forecasting future real economic activity

Juha Junttila () and Juuso Vataja

Economic Systems, 2018, vol. 42, issue 4, 569-583

Abstract: Recently introduced measures for economic policy uncertainty (EPU), included in the data from 1997 to 2016, have a role in forecasting out-of-sample values for future real economic activity for both the euro area and UK economies. The inclusion of EPU measures, either for the US, the UK or for overall European economies, improves the forecasting ability of models based on standard financial market information, especially for the period before the 2008 global crisis. However, during and after the crisis period, the slope of the yield curve and excess stock market returns improves the out-of-sample forecast performance the most compared to an AR-benchmark model. Hence, the EPU information is important in times of normal business cycles, but might contain similar information components to financial market return variables during turbulent crisis periods in the financial markets and in the real economy.

Keywords: Financial markets; Leading indicators; Macroeconomic forecasting; Time series; Uncertainty (search for similar items in EconPapers)
JEL-codes: E17 E44 E66 G01 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-01-25
Handle: RePEc:eee:ecosys:v:42:y:2018:i:4:p:569-583