Working Paper: NBER ID: w29763
Authors: Hites Ahir; Nicholas Bloom; Davide Furceri
Abstract: We construct the World Uncertainty Index (WUI) for an unbalanced panel of 143 individual countries on a quarterly basis from 1952. This is the frequency of the word “uncertainty” in the quarterly Economist Intelligence Unit country reports. Globally, the Index spikes around major events like the Gulf War, the Euro debt crisis, the Brexit vote and the COVID pandemic. The level of uncertainty is higher in developing countries but is more synchronized across advanced economies with their tighter trade and financial linkages. In a panel vector autoregressive setting we find that innovations in the WUI foreshadow significant declines in output. This effect is larger and more persistent in countries with lower institutional quality, and in sectors with greater financial constraints.
Keywords: No keywords provided
JEL Codes: E0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher institutional quality (L15) | Less pronounced negative impact of uncertainty on GDP growth (F69) |
| Lower institutional quality (O17) | Larger negative impact of uncertainty on GDP growth (F69) |
| Higher financial dependence (G59) | Larger adverse effects from uncertainty on productivity (D89) |
| Innovations in the World Uncertainty Index (WUI) (D89) | Significant declines in GDP growth (F69) |