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Estimation of Economic Policy Uncertainty

Author

Listed:
  • Diana Petrova

    (RANEPA)

  • Pavel Trunin

    (RANEPA; Gaidar Institute for Economic Policy)

Abstract

In this paper, we construct an economic policy uncertainty index for Russia based on news articles in online media. The economic policy uncertainty index is calculated as the frequency of news articles that contain certain phrases from the 'economy', 'uncertainty', and 'policy' keyword categories. A comparative analysis of measures of economic uncertainty shows that our news-based index captures periods of economic uncertainty better than the well-known Baker-Bloom-Davis index does. We identify the following key periods of economic uncertainty over the period from 1999 to 2022: the 2008-2009 global financial crisis, the 2010-2012 European debt crisis, the 2014-2015 currency crisis in Russia, oil shocks in 2016 and 2020, as well as the period of the coronavirus pandemic and anti-Russian sanctions in 2014-2022. We also estimate the impact of economic policy uncertainty on economic activity in Russia over the period from 2001Q1 to 2022Q1 using a VAR model. The results suggest that increases in economic policy uncertainty are associated with decreases in GDP and investment.

Suggested Citation

  • Diana Petrova & Pavel Trunin, 2023. "Estimation of Economic Policy Uncertainty," Russian Journal of Money and Finance, Bank of Russia, vol. 82(3), pages 48-61, September.
    • Handle: RePEc:bkr:journl:v:82:y:2023:i:3:p:48-61
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    References listed on IDEAS

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    More about this item

    Keywords

    uncertainty; economic policy uncertainty; text analysis; real options channel; VAR;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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