The information content of conflict, social unrest and policy uncertainty measures for macroeconomic forecasting

Marina Diakonova (), Luis Molina Sánchez, Hannes Mueller, Javier Pérez and Cristopher Rauh ()
Additional contact information
Marina Diakonova: Banco de España
Cristopher Rauh: University of Cambridge

No 2232, Working Papers from Banco de España

Abstract: It is widely accepted that episodes of social unrest, conflict, political tensions and policy uncertainty affect the economy. Nevertheless, the real-time dimension of such relationships is less studied, and it remains unclear how to incorporate them in a forecasting framework. This can be partly explained by a certain divide between the economic and political science contributions in this area, as well as by the traditional lack of availability of high-frequency indicators measuring such phenomena. The latter constraint, though, is becoming less of a limiting factor through the production of text-based indicators. In this paper we assemble a dataset of such monthly measures of what we call “institutional instability”, for three representative emerging market economies: Brazil, Colombia and Mexico. We then forecast quarterly GDP by adding these new variables to a standard macro-forecasting model in a mixed-frequency MIDAS framework. Our results strongly suggest that capturing institutional instability based on a broad set of standard high-frequency indicators is useful when forecasting quarterly GDP. We also analyse the relative strengths and weaknesses of the approach.

Keywords: forecasting; social unrest; social conflict; policy uncertainty; forecasting GDP; natural language processing; geopolitical risk (search for similar items in EconPapers)
JEL-codes: D74 E37 N16 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2022-09
New Economics Papers: this item is included in nep-big and nep-des
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The information content of conflict, social unrest and policy uncertainty measures for macroeconomic forecasting (2024)
Working Paper: The Information Content of Conflict, Social Unrest and Policy Uncertainty Measures for Macroeconomic Forecasting (2024)
Working Paper: The Information Content of Conflict, Social Unrest and Policy Uncertainty Measures for Macroeconomic Forecasting (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2232

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