US EPU Indices

US Monthly EPU Index

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To measure policy-related economic uncertainty, we construct an index from three types of underlying components. One component quantifies newspaper coverage of policy-related economic uncertainty. A second component reflects the number of federal tax code provisions set to expire in future years. The third component uses disagreement among economic forecasters as a proxy for uncertainty.

News Coverage about Policy-related Economic Uncertainty

Our first component is an index of search results from 10 large newspapers. The newspapers included in our index are USA Today, the Miami Herald, the Chicago Tribune, the Washington Post, the Los Angeles Times, the Boston Globe, the San Francisco Chronicle, the Dallas Morning News, the Houston Chronicle, and the Wall Street Journal. To construct the index, we perform month-by-month searches of each paper, starting in January of 1985, for terms related to economic and policy uncertainty. In particular, we search for articles containing the term 'uncertainty' or 'uncertain', the terms 'economic' or 'economy' and one or more of the following terms: 'congress', 'legislation', 'white house', 'regulation', 'federal reserve', or 'deficit'. In other words, to meet our criteria for inclusion the article must include terms in all three categories pertaining to uncertainty, the economy and policy.

To deal with changes over time in the volume of articles for a given paper, we divide the raw count of policy uncertainty articles by the total number of articles in the same paper and month. We then normalize the resulting series for each paper to have a unit standard deviation from January 1985 through December 2009. Next, we sum the normalized values over papers in each month to obtain a multi-paper index. Finally, we re-normalize the multi-paper index to an average value of 100 from January 1985 through December 2009.

With each monthly update, data from the preceding two months may be revised slightly, as well. This is driven by the fact that some online newspapers do not immediately update their online archives with all articles, leading to slightly changing totals for the previous 1-2 months.

July 2014 Revision

Tax Code Expiration Data

The second component of our index draws on reports by the Congressional Budget Office (CBO) that compile lists of temporary federal tax code provisions. Temporary tax measures are a source of uncertainty for businesses and households because Congress often extends them at the last minute, undermining stability in and certainty about the tax code.

The CBO reports include data on scheduled expirations of federal tax code provisions in the contemporaneous calendar year and each of the next 10 years. The CBO documents briefly describe the tax code provision, its projected revenue effect, and its scheduled expiration year and month, typically but not always in December. We use the CBO data as follows. First, we compute the absolute dollar value of the expiring tax provisions in each year over the 10-year horizon. We then discount future expirations at 50% per year, and sum the discounted dollar-weighted tax code expirations to obtain an index value for each January, which we hold constant during the calendar year. We apply a high annual discount rate because tax code provisions set to expire in the distant out years are unlikely to be a major source of current concern.

Economic Forecaster Disagreement

The third component of our policy-related uncertainty index draws on the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters. This quarterly survey covers a wide range of macroeconomic variables. We utilize the individual-level data for three of the forecast variables, the consumer price index (CPI), purchase of goods and services by state and local governments, and purchases of goods and services by the federal government. For each series, we look at the quarterly forecasts for one year in the future. We chose these variables because they are directly influenced by monetary policy and fiscal policy actions. We treat the dispersion in the forecasts of these variables as proxies for uncertainty about monetary policy and about government purchases of goods and services at the federal level. This approach builds on a long literature using disagreement among forecasters as a proxy for economic uncertainty.

For inflation, we look at the individual forecasts for the quarterly inflation rates four quarters in the future as measured by the CPI. To construct the dispersion component, we then take the interquartile range of each set of inflation rate forecasts in each quarter.

For both federal and state/local government purchases, we divide the interquartile range of four-quarter-ahead forecasts by the median four-quarter-ahead forecast and multiply that quantity by a 5-year backward-looking moving average for the ratio of nominal purchases, either federal or state/local, to nominal GDP. We hold the values of the forecaster disagreement measures constant within each calendar quarter. Finally, we sum the two indices, weighted by their nominal sizes, to construct a single federal/state/local index. Due to delays in the release of this data, we set each quarter's data forward one month. That is, when Quarter 3 data is released, it will be applied to August, September, and October instead of July, August, and September.

Constructing our overall policy-related economic uncertainty index

To construct our overall index of policy-related economy uncertainty, we first normalize each component by its own standard deviation prior to January 2012. We then compute the average value of the components, using weights of 1/2 on our broad news-based policy uncertainty index and 1/6 on each of our other three measures (the tax expirations index, the CPI forecast disagreement measure, and the federal/state/local purchases disagreement measure).

Categorical EPU Data

The Categorical Data includes a range of sub-indexes based solely on news data. These are derived using results from the Access World News database of over 2,000 US newspapers. Each sub-index requires our economic, uncertainty, and policy terms as well as a set of categorical policy terms. For instance, articles that fulfill our requirements to be coded as EPU and also contain the term 'federal reserve' would be included in the monetary policy uncertainty sub-index. For a more detailed explanation, please visit the Categorical EPU page.

US Daily News Index

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From August 7, 2013, we are featuring an improved version of our daily economic policy uncertainty index. The new version offers greater accuracy in the most recent data, and it better conforms to the measurement practices used in our monthly news-based EPU index. The old version of the daily EPU index remains available here and will continue to be updated.

The daily news-based Economic Policy Uncertainty Index is based on newspaper archives from Access World New's NewsBank service. The NewsBank Access World News database contains the archives of thousands of newspapers and other news sources from across the globe. While NewsBank has a wide range of news sources, from newspapers to magazines to newswire services, we conduct our analysis only utilizing newspaper sources.

We restrict our attention to newspapers in the United States, of which NewsBank covers well over 1000. These newspapers range from large national papers like USA Today to small local newspapers across the country. The data spans from 1985 to 2013.

Our primary measure for this index is the number of articles that contain at least one term from each of 3 sets of terms. The first set is economic or economy. The second is uncertain or uncertainty. The third set is legislation or deficit or regulation or congress or federal reserve or white house.

The number of newspapers that NewsBank covers over our sample period has drastically increased from 18 in 1985 to over 1800 by 2008. To correct for this growth, we must normalize our index of the number of economic policy uncertainty articles. To do this, we take daily counts of the total number of newspaper articles.

We update the series at ~6:00AM Pacific Standard Time. Note that each day we update the data from the current month and the last month, so these data are subject to changes. The rotating graph on the home page shows a 7-day moving average (current day + 6 previous days) of this daily data series.

Finally, we have also included the full set of data from our daily pulls. The "Full Daily Updates Data" provides a rolling set of 60 observations per day, giving the full set of results used to update the US Daily News-Based Index each day going forwards. Note in November 2012 the data changes from being derived from the number of articles with the word 'today' in them to the entire set of articles. The ongoing series is now entirely based on EPU articles normalized by 'all' articles, but in this daily updates data we kept the preceding daily updates using the 'today' series.

US Historical News-Based Policy Index

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Two overlapping sets of newspapers are used in this (still-preliminary) series. The first spans 1900 - 1985 and is comprised of the Wall Street Journal, the New York Times, the Washington Post, the Chicago Tribune, the LA Times, and the Boston Globe. From 1985 until 2012, we use the previously mentioned newspapers along with USA Today, the Miami Herald, the Dallas Morning Tribune, and the San Francisco Chronicle.

To construct the index, we perform month-by-month searches of each paper, starting in January of 1900, for terms related to economic and policy uncertainty. In particular, we search for articles containing the term 'uncertainty' or 'uncertain', the terms 'economic', 'economy', 'business', 'commerce', 'industry', and 'industrial' as well as one or more of the following terms: 'congress', 'legislation', 'white house', 'regulation', 'federal reserve', 'deficit', 'tariff', or 'war'. In other words, to meet our criteria for inclusion the article must include terms in all three categories pertaining to uncertainty, the economy and policy.

To deal with changing volumes of news articles for a given paper over time, we divide the raw counts of policy uncertainty articles by the total number of news articles containing terms regarding the economy or business in the paper. We then normalize each paper's series to unit standard deviation prior to December 2009 and sum each paper's series.

Due to changing language usage and newspaper editorial standards over this time period, we are continuing to experiment with search term choice. We are performing both human and computer audits of historical news articles across a number of newspapers in this sample in order to best characterize changing levels of news coverage of economic policy uncertainty.