Measuring Brazilian Economic Uncertainty

Abstract

We propose a measure of economic uncertainty, the Brazilian Economic Uncertainty Indicator, based on the news as well as business forecasts. The index expands the variety of newspapers handled by Baker et al. (Q J Econ 131(4):1593–1636, 2016) for Brazil. Our indicator captures Brazilian recent events such as the corruption scandals, the fiscal and economic crisis, the 2016 impeachment, the 2008 financial crisis and the 2002 presidential elections as moments of high uncertainty. An econometric study using a Bayesian Vector Autoregressive approach was carried out and revealed that uncertainty shocks cause an economic downturn in subsequent periods, as emphasized in the relevant literature.