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A new economic policy uncertainty index for Spain

Corina Ghirelli (), Javier Pérez () and Alberto Urtasun ()
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Corina Ghirelli: Banco de España
Alberto Urtasun: Banco de España

No 1906, Working Papers from Banco de España, Working Papers Homepage

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.

Keywords: economic uncertainty; policy uncertainty; uncertainty shocks. (search for similar items in EconPapers)
JEL-codes: D8 C43 E2 E3 (search for similar items in EconPapers)
Date: 2019-03
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