Measuring the energy-related uncertainty index

• Published in: Energy economics 2023-08, Vol.124, p.106817, Article 106817
• Main Authors: Dang, Tam Hoang-Nhat, Nguyen, Canh Phuc, Lee, Gabriel S., Nguyen, Binh Quang, Le, Thuy Thu
• Format: Article
• Language: English
• Subjects: EIU reports; Energy shocks; Energy uncertainty; Text searching approach; Uncertainty
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2023.106817

This paper develops a novel energy-related uncertainty index (the EUI). We use the text analysis of the monthly country reports of the Economist Intelligence Unit (EIU) to construct the EUI, which measures the uncertainties related to energy markets for 28 developed and developing countries from 1996 to 2022 using. We use the vector autoregression (VAR) model and a range of other estimation methods to evaluate and check the efficacy of the EUI. The EUI appears to respond strongly to oil shocks, including sharp drops in oil prices. We also find that the EUI and other measures of uncertainties spiked during the global financial crisis, the European debt crises, the Covid-19 pandemic, and the Russian invasion of Ukraine. Further analysis confirms that an increase in the EUI tends to hinder economic activities and outputs, not only at a country level but also at an industry level. •A novel energy-related uncertainty index (the EUI) is developed.•The text analysis of the monthly country reports of the Economist Intelligence Unit (EIU) is applied to construct the EUI.•The uncertainties related to energy markets are measured for 28 developed and developing countries from 1996 to 2022.•The vector autoregression (VAR) model and a range of other estimation methods to evaluate and check the efficacy of the EUI.•The EUI appears to respond strongly to oil shocks, including sharp drops in oil prices.