A0161
Title: Unveiling the sources of economic uncertainty
Authors: Javier J Perez - Bank of Spain (Spain)
Andres Azqueta-Gavaldon - Bank of Spain (Spain) [presenting]
Marina Diakonova - Bank of Spain (Spain)
Corinna Ghirelli - Bank of Spain (Spain)
Guillem Tobias - Bank of Spain (Spain)
Abstract: Detailed insights are provided into the nature and sources of economic uncertainty, offering a clearer and more precise understanding of the underlying factors driving uncertainty across different contexts. By focusing on the true sources of economic uncertainty, the aim is to harmonize the diverse indicators and metrics used in the field. By applying an established methodology across ten European countries using data in eight languages, the aim is to bring clarity and order to the myriad facets of economic uncertainty. A comprehensive new database is constructed to analyze and decompose news about economic uncertainty into various topics. Initially, topic modeling is used to identify the components of economic uncertainty. These components are then aggregated using the most natural and statistically validated techniques to ensure accurate grouping. This validation phase is crucial to confirm the robustness of the aggregated topics. In the second phase, these newly defined groupings are used to gain a deeper understanding of existing measures of uncertainty. Employing dimensional reduction techniques such as LASSO regression, the most significant components of uncertainty are identified, and their evolution is tracked over time. This approach also allows the examination of specific peaks in key uncertainty indicators like VIX, EPU, etc.
