A News-Based Economic Policy Uncertainty Index for Nigeria

19 Pages Posted: 3 May 2023 Last revised: 13 Aug 2023

See all articles by Afees Salisu

Afees Salisu

Centre for Econometrics and Applied Research

Sulaiman Salisu

Research and Development Training (READT) International Resources

Subair Salisu

Research and Development Training (READT) International Resources

Date Written: April 16, 2023

Abstract

In this study, we develop the first daily news-based Economic Policy Uncertainty (EPU) index for Nigeria, which was previously not covered in recent EPU indices. The need to track economic uncertainties in Nigeria becomes crucial for investment and policy, especially with the renewed interest in the country as an important investment destination. To construct the EPU index, we use relevant keywords from articles in prominent newspapers in the country, covering the aftermath of the global financial crisis and the COVID pandemic, with a data scope of January 2010 to November 2022. We evaluate the predictability of the index by examining its connection with economic and financial variables like exchange rates and stock prices in Nigeria. The results are robust to alternative model specifications, different data frequencies, and multiple forecast horizons. We hope to extend this exercise to other useful indices, including Geopolitical Risk, Financial Stress Indicators, and Monetary Policy Uncertainty, which are not readily available for Africa, including Nigeria.

Keywords: News, Economic Policy Uncertainty, Nigeria, Machine Learning, Predictability, Forecast Evaluation

JEL Classification: D80, C53, C54

Suggested Citation

Salisu, Afees and Salisu, Sulaiman and Salisu, Subair, A News-Based Economic Policy Uncertainty Index for Nigeria (April 16, 2023). Available at SSRN: https://ssrn.com/abstract=4420077 or http://dx.doi.org/10.2139/ssrn.4420077

Afees Salisu (Contact Author)

Centre for Econometrics and Applied Research ( email )

Ibadan, OR Oyo Stase 10001
Nigeria

Sulaiman Salisu

Research and Development Training (READT) International Resources ( email )

18 Mobolaji Bank Anthony Way, Ilupeju
Ikeja, 101233
Nigeria
+2348034711769 (Phone)

HOME PAGE: http://readtinternationalresources.com/

Subair Salisu

Research and Development Training (READT) International Resources ( email )

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