Consider the following statements about the Economic Policy Uncertainty Index: 1. The index has been developed by the World Bank. 2. It uses data from the newspapers. 3. In the last decade, the Economic Policy Uncertainty was the highest in the last year. Which of the statements given above is/are correct?

The Economic Survey of 2018-19 has relied on the Economic Policy Uncertainty Index.

A globally recognized attempt at quantifying economic policy uncertainty is the one by Baker et al. (2016), who develop an Economic Policy Uncertainty (EPU) Index for various countries, including India.

To measure policy-related economic uncertainty, we construct an index from three types of underlying components.

(i) Quantifies newspaper coverage of policy-related economic uncertainty.

(ii) Reflects the number of federal tax code provisions set to expire in future years.

(iii) Uses disagreement among economic forecasters as a proxy for uncertainty.

To measure the Economic Policy Uncertainty, the Index is created by quantifying newspaper coverage of policy-related economic uncertainty. The Index reflects frequency of articles in leading newspapers that contain the following triple: ‘economic’ or ʻeconomy’; ʻuncertain’ or ʻuncertainty’; and one or more of policy related words ʻfiscal policy’, ʻmonetary policy’, ʻPMO’, ʻParliament’.

Only those articles that have words from all three categories are counted for measuring economic policy uncertainty. Articles are taken from various newspapers, including, The Economic Times, The Times of India, The Hindustan Times, The Hindu, The Financial Express, The Indian Express and The Statesman using access world news.