Does Economic Policy Uncertainty differ from other uncertainty measures? Replication of Baker, Bloom, and Davis (2016)

Abstract

This paper revisits Baker et al.'s (2016) main finding that shows the significant negative impacts of shocks to the Economic Policy Uncertainty index on the US aggregate economic activity. We focus on subsample analyses with sample periods extended to December 2022. We find that shocks to the index do not significantly affect the economy during the period from September 2008 to December 2019, in contrast to significant negative impacts found in the sample ending earlier. Interestingly, this feature is specific to the Economic Policy Uncertainty index, while other popular uncertainty measures retain downward pressures on the economy across all of the subsample periods under examination. Economic Policy Uncertainty again deters economic activity once the COVID-19 period is included in the sample, implying that the size of shocks and/or the state of the economy may play an additional role for its transmission.