The World Uncertainty Index

TLDR: The World Uncertainty Index (WUI) as mentioned in this paper measures the frequency of the word "uncertainty" in the quarterly Economist Intelligent Unit country reports from 1996 to 2016.

Abstract: We construct a new index of uncertainty — the World Uncertainty Index (WUI) — for 143 individual countries on a quarterly basis from 1996 onwards. This is defined using the frequency of the word “uncertainty” in the quarterly Economist Intelligent Unit country reports. Globally, the Index spikes near the 9/11 attack, SARS outbreak, Gulf War II, Euro debt crisis, El Nino, European border crisis, UK Brexit vote and the 2016 US election. Uncertainty spikes tend to be more synchronized within advanced economies and between economies with tighter trade and financial linkages. The level of uncertainty is significantly higher in developing countries and is positively associated with economic policy uncertainty and stock market volatility, and negatively with GDP growth. In a panel vector autoregressive setting, we find that innovations in the WUI foreshadow significant declines in output.