UK Interwar Index

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We are pleased to host a new index of economic policy uncertainty for interwar Britain developed by Jason Lennard in "Uncertainty and the Great Slump".

The index follows the methods in "Measuring Economic Policy Uncertainty" by Scott R. Baker, Nicholas Bloom and Steven J. Davis.

To construct his index, Lennard searches the digital archives of the Daily Mail, The Guardian and The Times from January 1920 to December 1938. He obtains monthly counts of articles that contain at least one term from each of the following three terms sets: Economy ("business", "commerce", "commercial", "economic", "economy" or "industry"), Policy ("Bank of England", "Bank Rate", "budget", "deficit", "duty", "policy", "regulation", "spending", "tariff", "tax" or "war") and Uncertainty ("uncertain" or "uncertainty"), including close variants of these terms. He then divides these counts by the total number of articles in the same newspaper and month to obtain a scaled monthly frequency count for each paper from 1920 to 1938. For each newspaper, he standardizes the monthly series for the raw scaled frequency counts to unit standard deviation over time. He averages the standardized series over the three papers by month to obtain an aggregate index and, in the final step, normalizes the aggregate index to a mean of 100.

This index differs slightly from the UK historical index constructed by Scott R. Baker, Nicholas Bloom and Steven J. Davis. First, Lennard expands the number of newspapers to include the Daily Mail, which was the biggest newspaper in the world at the time in terms of circulation. Second, he enlarges the set of policy terms to include "Bank Rate" and "duty", which were commonplace terms in the interwar period for the main instrument of monetary policy and tariff policy, respectively.