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Forecasting European Economic Policy Uncertainty

Author

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  • Stavros Degiannakis

    (Department of Economics and Regional Development, Panteion University of Social and Political Sciences)

  • George Filis

    () (Department of Accounting, Finance and Economics, Bournemouth University)

Abstract

Forecasting the economic policy uncertainty in Europe is of paramount importance given the on-going debt crisis and the Brexit vote. This paper evaluates monthly out-of-sample economic policy uncertainty index forecasts and examines whether ultra-high frequency information from asset market volatilities and global economic policy uncertainty can improve the forecasts relatively to the no-change forecast. The results show that the global economic policy uncertainty provides the highest predictive gains, followed by the European and US stock market volatilities. The results hold true even when we consider the directional accuracy.

Suggested Citation

  • Stavros Degiannakis & George Filis, 2018. "Forecasting European Economic Policy Uncertainty," BAFES Working Papers BAFES15, Department of Accounting, Finance & Economic, Bournemouth University.
  • Handle: RePEc:bam:wpaper:bafes15
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    Keywords

    Economic policy uncertainty; forecasting; financial markets; commodities markets; HAR; ultra-high frequency information;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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