A New Economic Policy Uncertainty Index for Spain

24 Pages Posted: 8 Mar 2019

See all articles by Corinna Ghirelli

Corinna Ghirelli

Bank of Spain

Javier J. Pérez

Banco de España - Research Department

Alberto Urtasun

Banco de España

Date Written: March 8, 2019


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

JEL Classification: D8; C43; E2; E3

Suggested Citation

Ghirelli, Corinna and Perez, Javier J. and Urtasun, Alberto, A New Economic Policy Uncertainty Index for Spain (March 8, 2019). Banco de Espana Working Paper No. 1906, Available at SSRN: https://ssrn.com/abstract=3349108 or http://dx.doi.org/10.2139/ssrn.3349108

Corinna Ghirelli (Contact Author)

Bank of Spain ( email )

Calle Alcala, 48
Madrid, 28014

Javier J. Perez

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid

HOME PAGE: http://www.bde.es/investigador/staff/95.htm

Alberto Urtasun

Banco de España ( email )

Alcala 50
Madrid 28014

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