Over the last decade economic research has devoted large effort to build reliable uncertainty indexes, be it survey-based, model-based, or news-based. With no ambition to be exhaustive, the note discusses the main indicators in each category, highlighting their main properties, as well as the benefits and risks of using them for policy purposes.
News-based indexes, characterized by greater intuitiveness, transparency and real-time availability, are the most popular both in policy debates and in the academic literature. They are also quite noisy, though, and could be misleading in particular when relying on a limited number of newspapers, or referring to a small, peripheral country. Well-developed probabilistic surveys still represent a hard-to-beat benchmark when one is interested in uncertainty concerning specific variables as opposed to more abstract concepts such as Economic Policy Uncertainty.
