The World Uncertainty Index
Abstract
We construct the World Uncertainty Index (WUI) for an unbalanced panel of 143 individualcountries on a quarterly basis from 1952. This is the frequency of the word “uncertainty” in the
quarterly Economist Intelligence Unit country reports. Globally, the Index spikes around major
events like the Gulf War, the Euro debt crisis, the Brexit vote and the COVID pandemic. The
level of uncertainty is higher in developing countries but is more synchronized across advanced
economies with their tighter trade and financial linkages. In a panel vector autoregressive setting
we find that innovations in the WUI foreshadow significant declines in output. This effect is
larger and more persistent in countries with lower institutional quality, and in sectors with greater
financial constraints.