Measuring economic and economic policy uncertainty and their macroeconomic effects: the case of Spain

We provide additional evidence on the relationship between uncertainty and economic activity. For this purpose, we gather and construct a wide range of proxy indicators of economic and economic policy uncertainty from Spain. We distinguish between the relative merits of different types of measures based on (i) the volatility of financial markets; (ii) economic analysts’ disagreement; and (iii) economic policy uncertainty. We show that the first and the third block of measures are the most relevant to grasp the negative effects of unexpected changes in uncertainty on aggregate economic developments, as measured by real GDP. In addition, we find that economic policy uncertainty and financial uncertainty shocks produce visible negative effects on private consumption. The negative responses on capital goods investments are initially bigger in magnitude but vanish more quickly.