I was reviewing measurable economic policy uncertainty and found interesting differences between the U.S. and Europe:
figure 1: Uncertainty indices for economic policy in the United States (blue) and Europe (brown) (news only). The light green shade indicates a pandemic in the United States. Source: policyuncertainty.com.
Most peaks can be interpreted as being driven by well-defined events. The January 2020 peak in the United States is worth noting because (1) it was not during the beginning of the lockdown (March) but in April, and (2) the corresponding peaks in Europe were relative to the average (indices cannot be compared across series).
This is not a discovery unique to Europe. Consider a broader look:
figure 2: Economic policy uncertainty index (news only) for the United States (blue), Europe (brown), the United Kingdom (green), China, the Baker-Bloom-Davis-Wang version (red) and the Japanese RIETI version (pink). The light green shade indicates a pandemic in the United States. Source: policyuncertainty.com.
People can’t see any other dynamics similar to the American series. The U.S. index jumped from a low position and decayed slowly. The peak in April was a 38% jump (in logarithmic terms); followed by China, with an increase of 10.8% (declining in other countries). This leads me to believe that during the Covid-19 pandemic, Mr. Trump’s unstable remarks and actions have led to a particularly high perceived policy uncertainty.
