Measuring Brazilian economic uncertainty 

Pedro Costa Ferreira

Is economic uncertainty an important issue?

Media has been giving attention to the theme

Is it important to measure Brazilian economic uncertainty?

Historical periods that have affected the economic uncertainty indicator

Is it important to measure Brazilian economic uncertainty ?

Lula defending non-payment of external debt

Lula criticizing the monetary stability plan (Real)

"No one needs to teach me the importance of controlling inflation."

"We will preserve the primary surplus to prevent domestic debt from rising and destroying confidence in the government's ability to honor its commitments."

Is it important to measure Brazilian economic uncertainty ?

April 15th and 17th

Impeachment proceedings is initiated against Dilma

Dilma is Impeached

May 9th

Waldir Maranhão [interim president of the chamber of deputies] tries to annul the impeachment

May 10th

August 31th

Waldir Maranhão revokes his cancelation

Is it important to measure Brazilian economic uncertainty ?

Is it important to measure Brazilian economic uncertainty ?

Brazil under uncertainty

Temer is recorded giving approval to the purchase of Cunha's silence [this is an opinion of O Globo]

Is it important to measure Brazilian economic uncertainty ?

Partial before JBS audio was leaked

Partial after JBS audio was leaked

Is it important to measure Brazilian economic uncertainty ?

17

this is the number of times that the Central Bank has cited the word uncertainty in the minutes of the  Meeting of the Monetary Policy Committee [May 2017]

"If sustained over a long period, high levels of uncertainty regarding the evolution of reforms and adjustments in the economy can have detrimental effects on economic activity."

source: O Globo (https://goo.gl/E1yd1v).

8

17

24

26

27

35

1989

1995

2000

2005

2010

2017

Is it important to measure Brazilian economic uncertainty ?

How are we measuring the economic uncertainty?

Brazilian Economic Uncertainty Indicator

IIE-Br

IIE-Br = 0.8 x Media + 0.2 x FD

compound indicator

IIE-Br

The weights were chosen to preserve the higher number of peaks possible

IIE-Br

IIE-Br Media

IIE-Br Media

Mention of uncertainty

• Term related to the economy: econ
• Terms related to the uncertainty: incert, crise, instab

Basically, the indicator is measuring the economic uncertainty taking into account the frequency of the news related to the theme;

IIE-Br Media

Online

Printed

Printed media

Online media

IIE-Br Media

IIE-Br Media - compound indicator

IIE-Br

 Forecasts Disagreement

IIE-Br Forecasts Diasagreement

Basically, the indicator is measuring the differences among the market forecasts.

Brazilian official CPI

Exchange rate [US/BRL]

IIE-Br

IIE-Br Forecasts Disagreement - compound indicator

Selic

rate

Forecasts Disagreement

Different weightings for the IIE-Br

Some moments of economic uncertainty

Brazilian Economic Uncertainty and  Economic Policy Uncertainty for Brazil [Bloom, Baker and Davis]

Out/02

Presidential Election

Out/08

Collapse of the Lehman Brothers

Ago/11

U.S.A credit-rating was downgraded

Ago/15

Brazilian credit-rating was downgraded

115.75

152.19

BVAR model

the impact of uncertainty shocks

BVAR model

the impact of uncertainty shocks

1. IIE-Br
2. Exchange Rate
3. Industrial Production
4. Index of economic activity of Central Bank
5. Unemployment Rate
6. Real interest rate

Data collected from December 2003 to July 2017

Variables:

BVAR model

the impact of uncertainty shocks

 Article: "Measuring Brazilian Economic Uncertainty"

Journal of Business Cycle Research

experiências...

Spatial Econometrics

Planejamento Hidrotérmico SEB

BETS

AST em R

Consumo de energia elétrica: análise integrada econométrica com IO analisys

Core inflation

Nowcasting: An R Package for Predicting Economic Variables Using Dynamic Factor Models 

Como modelar o abandono escolar

Obrigado!!

Pedro Costa Ferreira (Linkedin)