Uncertainty, Perception and the Internet

Quaderni - Working Paper DSE N° 1134, 2019

95 Pages Posted: 23 Oct 2019

See all articles by Maria Elena Bontempi

Maria Elena Bontempi

University of Bologna - Department of Economics

Michele Frigeri

University of Bologna - Department of Economics

Roberto Golinelli

University of Bologna - Department of Economics

Matteo Squadrani

University of Bologna

Date Written: October 1, 2019

Abstract

Macroeconomic uncertainty consists of three components: the unobservable, the heterogeneous and the “uncertain”. We are unaware of exactly when economic agents perceive uncertainty and which type of uncertainty interests them. This paper introduces and outlines a way of conducting large-scale data searches on the Web. We create the EURQ index of “economic uncertainty related queries” for both the USA and Italy. We show that the EURQ encapsulates agents’ need to gather more information during periods of uncertainty. This need either spontaneously arises in the case of macro-real and political uncertainty, or is induced by the media in the case of normative and financial uncertainty. This distinction is extremely important when trying to understand the immediate impact of fiscal policy uncertainty on economic variables, and how financial shocks can produce a significant short-term impact on economic activity. It is also helpful when trying to solve the identification and endogeneity issues encountered in the literature when assessing the role of uncertainty.

Keywords: macroeconomic uncertainty measurement, perception of uncertainty, Internet searches, Google Trends, finance-based indexes, survey-based indexes, news-based indexes

JEL Classification: D80, D91, E66, C32, H30

Suggested Citation

Bontempi, Maria Elena and Frigeri, Michele and Golinelli, Roberto and Squadrani, Matteo, Uncertainty, Perception and the Internet (October 1, 2019). Quaderni - Working Paper DSE N° 1134, 2019, Available at SSRN: https://ssrn.com/abstract=3469503 or http://dx.doi.org/10.2139/ssrn.3469503

Maria Elena Bontempi (Contact Author)

University of Bologna - Department of Economics ( email )

Strada Maggiore, 45
40125 Bologna, 40125
Italy
+39 051 2092600 (Phone)
+39 051 2092664 (Fax)

Michele Frigeri

University of Bologna - Department of Economics ( email )

Bologna
Italy

Roberto Golinelli

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 209 2638 (Phone)
+39 051 209 2664 (Fax)

Matteo Squadrani

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

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