Macroeconomic Uncertainty Indices for European Countries

Abstract

The present article seeks to develop a macroeconomic uncertainty index for the EU Member States based on Google Trends for a period of fifteen years (from January 2008 to December 2022). Monthly data were collected for the 12 countries for four different word-terms, as well as for unemployment rate, inflation and the 10-year Government Bond yield. For simplifying the research the keywords searched were in English and were not translated into the countries’ own languages. Our findings were then compared to existing uncertainty indices. Lastly, we employed Impulse Response Functions (IRFs) with the existing economic indicators to highlight the effect that one standard deviation shock on the uncertainty index has on all three indicators and its ability to accurately depict the future precariousness of the country.