World Uncertainty Index (WUI)

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We are pleased to host the World Uncertainty Index (WUI) developed by Hites Ahir (International Monetary Fund), Nicholas Bloom (Stanford University) and Davide Furceri (International Monetary Fund).

They construct quarterly indices of economic uncertainty for 143 countries from 1996 onwards using frequency counts of "uncertainty" (and its variants) in the quarterly Economist Intelligence Unit (EIU) country reports. The EIU reports discuss major political and economic developments in each country, along with analysis and forecasts of political, policy and economic conditions. They are created by country-specific teams of analysts and a central EIU editorial team. To make the WUI comparable across countries, the raw counts are scaled by the total number of words in each report.

Globally, the WUI spikes near the 9/11 attacks, the SARS outbreak, Gulf War II, the Euro debt crisis, El Niņo, Europe border-control crisis, the UK's referendum vote in favor of Brexit, and the 2016 US presidential election. Uncertainty spikes tend to be more synchronized within advanced economies and between economies with tighter trade and financial linkages. In addition, cross-country comparisons reveal that the level of uncertainty varies across countries and is, on average, smaller in advanced economies than in the rest of world.

The index is associated with greater economic policy uncertainty (EPU), stock market volatility, risk and lower GDP growth. Results from a Vector autoregression (VAR) analysis for a panel of 46 countries show that innovations in the WUI foreshadow significant declines in output.

For a detailed discussion of the construction of the WUI index and its properties, see The World Uncertainty Index. The dataset should be cited as Ahir, Bloom and Furceri, "The World Uncertainty Index", mimeo.