Ireland Monthly Indexes (Rice)

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We are pleased to host two indexes of economic policy uncertainty for Ireland developed by Jonathan Rice.

Rice constructs two indexes of Economic Policy Uncertainty for Ireland, as detailed in his paper on "Economic Policy Uncertainty in Small Open Economies: A Case Study of Ireland," which follows the index construction methods in "Measuring Economic Policy Uncertainty" by Scott R. Baker, Nicholas Bloom and Steven J. Davis.

His headline EPU index for Ireland begins in January 1982 and continues at a monthly frequency to the present. His second EPU index of Ireland aims to isolate the domestic aspect of economic policy uncertainty in Ireland and begins in January 1997.

The headline EPU series compiles newspaper articles from two leading Irish newspapers - the Irish Times and Irish Independent. The Irish Independent is Ireland's most widely circulated newspaper, shortly followed by the Irish Times. In line with Baker, Bloom and Davis (2016), Rice conducts a keyword search within the electronic archives of both newspapers for articles containing one or more of "uncertainty" or "uncertain", one or more of "economic" or "economy", and finally, one or more of the following policy-related terms: "legislation", "regulation", "Government", "deficit", "Central Bank", "budget", "Dáil", and "Taoiseach.". For the headline series, the resulting monthly count is scaled by the total number of same-month articles published in the two papers, and the data are normalised to an average value of 100 from January 1982 through March 2022.

Several alternative policy-related keywords were tested for their marginal contribution to the count of articles to arrive at the terms listed above. In addition, the final compilation of newspaper articles contained in the series was manually audited to ensure accuracy and test for errors, as detailed in the paper. The final list of policy-related keywords also closely resembles the keywords used in the original BBD paper, albeit from an Irish perspective.

For the Irish-Domestic EPU series, the headline Irish EPU series was purged of foreign uncertainty shocks. To do so, a foreign/global EPU series was constructed by extracting principal components from the 19 countries with published EPU series (at time of construction there were 19, excluding Ireland). Next, Rice regressed the headline Irish EPU series on these principal components and their lags, recovering the residuals. This residual series may be interpreted as movements in the Irish EPU series that are not predicted by current and lagged values of foreign EPU, thereby isolating an Irish-domestic EPU series. This series is available from 1997 and normalised to a mean of 100 from January 1997 through February 2022.

Although Rice's index construction methods are similar to those of Ryan Zalla (2016), the time-series correlation between the Rice and Zalla EPU indexes for Ireland is relatively low at 0.65. There are a few potential reasons for this. Rice includes an additional Irish newspaper (the Irish Independent), while Zalla uses only the Irish Times. Second, Zalla's EPU series includes several interpolated values to deal with months in which he finds no EPU articles in the digital archives that he taps. Rice uses the Irish Times and Irish Independent European Newsstream article corpus, while Zalla extracted articles from the Irish Times Website Archives.