The TPU index spikes initially in the 1970s following the Nixon and Ford "shocks" to U.S. trade policy. March 2020 . In Baker et al. The daily news-based Economic Policy Uncertainty Index is based on newspapers in the United States. 1125 0 obj <> endobj Table 1 shows a data cut that highli… The Nasdaq Composite IXIC … In this paper, I empirically investigate how trade policy uncertainty (TPU) influences firms' lobbying and investment decisions, and how these decisions can potentially complement each other. h�b```�w,��� ������ � B��(��,(���Û鏣σ��^VOd-x8�J�Y[3��j���q��m���ΰM��A�A��7v)���E K8��(cog���� ��� �bN��:�ljv"& ��6�ڐ�&4ĠW޵)����9O�xN���Z�d�_��W��AA�$�jmY�T3�d�R�%K��4H09|���������������*!���29Cg�H��\qqx���C�㘋� ^�#�y�x\�� id�8�ba��p����e˥S���L@R���,k The China EPU monthly index starts in … The second measure of trade policy uncertainty is estimated using a stochastic volatility model 10As is standard practice in textual analysis we pre-process the selected transcripts by removing stop words, such as \the", and by stemming the remaining terms, a technique that reduces the terms to their root. Trade policy uncertainty has skyrocketed in recent years with rising trade tensions between the US and China. Benigno and Groen revisit the macroeconomic impact of the recent increase in trade policy uncertainty, finding that high uncertainty can negatively affect domestic and foreign economic activity, and they identify a business sentiment channel that provides a complementary explanation of the recent developments in U.S. and global economic activities. The online supplementary material presents additional details, derivations, and extensions. Three measures of TPU are constructed using newspaper coverage, firms’ earnings calls, and tariff rates. In general, Bloom, Baker and Davis find that, as measured by the EPU index, current levels of economic policy uncertainty are at “extremely elevated levels.” First, here’re two indices of policy uncertainty — US news based and the US trade component, both from Baker, Bloom and Davis. To construct an index of overall economic policy uncertainty (EPU) for Japan, they count articles in four major Japanese newspapers (Yomiuri, Asahi, Mainichi and Nikkei) that contain at least one term in each of three categories: (E) 'economic' or 'economy'; (P) 'tax,' 'government spending', 'regulation,' 'central bank' or certain other policy-related terms; and (U) 'uncertain' or 'uncertainty'. Trade Policy Uncertainty(TPU) measure follows Handley and Limão (2017). … This is best exemplified by partisan fights in the United States Congress over the Fiscal Cliff and raising the debt ceiling. For additional details, including an analysis of the performance of the model, see Baker, Scott, Nicholas Bloom and Steven Davis (2012), "Measuring Economic Policy Uncertainty" The index tends to spike around times of global geopolitical or financial unrest. endstream endobj startxref Trade Policy Uncertainty Index: Mainland Papers for China 2019-10-09 2020-10-05 Source Baker, Scott R. 2019-10-09 2020-10-05 Bloom, Nick: 2019-10-09 2020-10-05 Davis, Stephen J. However, the open-ended nature of the current U.S.-China trade conflict and the looming Brexit deadlines mean that trade uncertainty may be more of a sleeping than a slayed giant. ScienceDirect ® is a registered trademark of Elsevier B.V. ScienceDirect ® is a registered trademark of Elsevier B.V. The average value of the monthly index, prior to the Trump administration, was a little more than 33. EARNINGS is the earnings before extraordinary items scaled by assets minus trade receivables at time t + 1. We compile a new China economic policy uncertainty (henceforth China EPU) index using information from mainland Chinese newspapers. Uncertainty about Trade Policy Uncertainty . Globally, the trade policy uncertainty index is rising sharply, having been stable at low levels for about 20 years. The news-based TPU index better captures episodes of trade policy uncertainty that did not result in high tariff volatility, such as the two spikes at the beginning of Kennedy’s presidency—when he proposed a rethinking of America’s trade policies—and around the negotiation of NAFTA in the early 1990s. Recently, there has been a surge of interest in economic policy uncertainty.1 Baker, Bloom, and Davis (2016) develop an index of overall economic policy uncertainty (EPU), including fiscal, monetary, trade, healthcare, national security, and regulatory policies, based on the occurrence of certain keywords in newspaper coverage. Figure 1: US Economic Policy Uncertainty index – news based (blue, left scale), and US Trade Policy Uncertainty categorical component index (tan, right scale). Graph and download economic data for Economic Policy Uncertainty Index: Categorical Index: Trade policy (EPUTRADE) from Jan 1985 to Oct 2020 about uncertainty, World, trade… Copyright © 2020 Elsevier B.V. or its licensors or contributors. (2019b), we examine the role of trade policy developments and 15 other news categories in large daily stock market moves. In 114 newspapers in mainland China, we search for articles which contain at least one keyword in each of the four criteria, namely (1) Economy, (2) Uncertainty, and (3) Policy in Table 1 and trade policy terms in Table A1 . 1141 0 obj <>/Filter/FlateDecode/ID[<692A98D6FE94F58E2FC11A6B44DBA87F>]/Index[1125 133]/Info 1124 0 R/Length 104/Prev 875104/Root 1126 0 R/Size 1258/Type/XRef/W[1 3 1]>>stream We revisit in this note the macroeconomic impact of the recent rise in trade policy uncertainty. The effects of trade policy uncertainty are highly visible in equity markets. Open-economy DSGE Model with heterogeneous firms and nominal rigidities analyzes news and uncertainty about future tariffs. Each series is demeaned and standardized by its standard deviation. At the time of writing, all authors worked at the Federal Reserve Board. The articles are from seven major daily newspapers: Boston Globe, Chicago Tribune, Guardian, Los Angeles Times, New York Times, Wall Street Journal, and Washington Post. We extend our approach to other countries, finding elevated levels of economic policy uncertainty abroad, as well. Data and codes for this paper can be found at https://www2.bc.edu/matteo-iacoviello/research.htm. All errors and omissions are our own responsibility. %%EOF 0 EPU_LAST is the natural log of the composite economic policy uncertainty index and news-based economic policy uncertainty index in the last month of each quarter. (2016). Federal Reserve Bank of New York Staff Reports, no. We develop a new method to measure economic policy uncertainty and test its dynamic relationship with output, investment, and employment. The Global Economic Policy Uncertainty index is a news-based measure of economic and policy uncertainty across 20 countries. We use cookies to help provide and enhance our service and tailor content and ads. Note: The quarterly average of the stock market volatility index from Bloom (2009) updated with the VXO to 2016Q2, the macro level uncertainty factor from Jurado et al. Overview and Paper. This … Trade policy uncertainty index. We find that, since 2008, economic policy uncertainty in the United States has been at a level approximately two times its long run average. The US trade policy index is a subindex based solely on US news data, and rises as US coverage of trade issues increases. The S&P 500 SPX gained 6.55 points, or 0.18%. Note: The figure shows the trade policy uncertainty index from January 2000 to October 2018. economic policy uncertainty index, while the trade policy uncertainty index is used in Section 5. %PDF-1.5 %���� (2015), and the economic policy uncertainty index constructed by Baker et al. 1257 0 obj <>stream The Dow Jones Industrial Average DJI rose 59.87 points, or 0.2%. Firm TPU is the average value of trade policy uncertainty over the four quarters, and is normalized so that it ranges from zero to 100. At an index value of 100, 1 percent of news articles contain references to trade policy uncertainty. The higher the index, the greater the trade policy uncertainty. The WTU index is computed by counting the frequency of uncertain (or the variant) that are near the following words: protectionism, North American Free Trade Agreement (NAFTA), tariff, trade, United Nations Conference on Trade and Development (UNCTAD) and World Trade Organization (WTO) in EIU country reports. The chart below displays an index of US trade-policy uncertainty (TPU) that I developed with Northwestern’s Scott R. Baker and Stanford’s Nicholas Bloom. JEL classification: C11, C22, E53 . This paper studies the effects of unexpected changes in trade policy uncertainty (TPU) on the U.S. economy. News and increased uncertainty about higher future tariffs reduce investment and activity. Gianluca Benigno and Jan J. J. Groen. �.�Sȗ�p��(�g�Sε. It reflects the monthly frequency of articles in US newspapers that discuss both economic policy uncertainty and trade policy. As Graph and download economic data for Trade Policy Uncertainty Index: Mainland Papers for China (CHNMAINLANDTPU) from Jan 2000 to Oct 2020 about uncertainty, trade… By continuing you agree to the use of cookies. Their measure depends on the dierence between the column 2 tariand the MFN tariin 2001, manied by the substitutability coecient ˙. 2. The methodology follows Bloom, Baker and Davis (2016). Trade policy uncertainty reduced U.S. investment by about 1.5% in 2018. The Houston Rockets have reportedly traded All-Star Russell Westbrook to the Washington Wizards in exchange for John Wall. Global trade uncertainty increasing. We thank the organizers of the Carnegie-Rochester-NYU Conference on Public Policy, our discussant Joseph Steinberg, as well as George Alessandria, Aaron Flaaen, Andrew Foerster, Ricardo Reyes-Heroles, Nelson Lind, Beth Anne Wilson, and seminar and conference participants in various venues. The empirical results are interpreted through the lens of a two-country general equilibrium model with nominal rigidities and firms’ export participation decisions. Dario Caldara, Matteo Iacoviello, Patrick Molligo, Andrea Prestipino, and Andrea Raffo construct a monthly index of Trade Policy Uncertainty (TPU Index) by counting the frequency of joint occurrences of trade policy and uncertainty terms across major newspapers. Trade as a component of the World Uncertainty Index has been low and nearly flat for most of the last twenty years, but has experienced a major spike in uncertainty over the last four years, in particular due to the U.S.-China trade dispute and the setbacks in negotiating a smooth UK exit from the European Community. Literature on policy uncertainty and trade There is a large body of theoretical and empirical work that studies the impact of uncertainty, and of policy uncertainty, on growth and other macroeconomic variables. h�bbd```b``�"��H=0{��n�J@d�m�l $u�Al{��"mB@��,�� &;���'L�,_�&30m���p��(I����=@� �C Data is updated on this website on the first day of each month. The economic effects of trade policy uncertainty, https://doi.org/10.1016/j.jmoneco.2019.11.002, https://www2.bc.edu/matteo-iacoviello/research.htm. United States Economic Policy Uncertainty Index Much of the policy uncertainty in the United States has revolved around fiscal policy as well as uncertainty over the tax code. FRED Economic Policy Uncertainty Index We live in uncertain times - an assertion supported by the Federal Reserve’s economic policy uncertainty index. The index shows increased uncertainty starting around the third quarter of 2018, coinciding with a heavily publicized series of tariff increases by the United States and China. Firm-level and aggregate macroeconomic data reveal that increases in TPU reduce business investment. The views expressed in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of anyone else associated with the Federal Reserve System. Alternatively, Handley and Limao (2014) propose a non-linear measure of trade policy uncertainty, which is based on rm decisions under general equilibrium. New measures of trade policy uncertainty are constructed using firm-level and aggregate data. For each daily stock-market jump, we then read the following day’s Wall Street Journalaccount to classify the perceived trigger of the market jump. The impact of uncertainty on global trade policy spreads to the entire world's economies and individuals, thereby, motivating greater holdings of Bitcoin due to its hedging capabilities. According to Davis (2018), President Trump's trade war policy increases uncertainty about global trade policy and it can be measured by the index of TPI. Abstract. We first identify every day since 1900 in which the US market moves by more than 2.5%, a total of 1,116 days. Concluding remarks follow. Investment growth is the sum of capital expenditures for the four quarters ending in 2019Q1 relative to capital expenditures for the four quarters ending in … 919 .