Twitter-based economic policy uncertainty index for Chile

In this paper, we develop a daily-frequency measure of economic uncertainty for Chile employing information that was obtained from Twitter accounts using web scraping techniques and following closely the methodology proposed by Baker et al. (2016). Our proposed measures, called DEPU and DEPUC, aim to capture the level of generaldisagreement —a proxy for economic uncertainty— in topics such as the economy, economic policies, uncertainty about particular events, and the current economic situation in Chile. Both indices, available from 2012 onwards, show significant hikes that coincide with several local and international episodes that provoked extraordin ary levels of economic uncertainty in Chile, especially after the events around the civil protests in mid-October 2019 and the COVID-19 pandemic in mid-March 2020. An empirical exercise reveals that the proposed measures are significant determinants of the nominal exchange rate dynamics, especially when the magnitude of this variable is high and a week after the shock occurs. When the exchange rate is low, on the contrary, the impact of uncertainty on this variable is quantitatively smaller for any forecasting horizon. These features, and others discussed in the paper, highlight the usefulness of the proposed metric as an additional indicator that policymakers can incorporate into their monitoring toolkit