Global markets have been riveted and roiled by escalating trade tensions between the US and China, the world's biggest economies. A shroud of uncertainty - a word detested by markets - has been thrown over the global economy. But can we measure trade uncertainty? A new index is trying to.
Experts from the International Monetary Fund (IMF) and Stanford University have developed a new index, unveiled last week, that seeks to measure "trade uncertainty". The index is hosted on the appropriately named website Economic Policy Uncertainty.
The methodology is quite simple and builds on the format used for the existing World Uncertainty Index (WUI), a quarterly measure of economic uncertainty for 143 countries from 1996 onwards based on the frequency of the word uncertainty, or its variants, appearing in Economist Intelligence Unit (EIU) country reports.
The new World Trade Uncertainty (WTU) index, with data also stretching back to 1996, is a variation on the model. It crunches the number of times uncertainty is mentioned in close proximity to the word "trade" or related words, such as "protectionism" and "World Trade Organisation" in EIU reports, which examine major political and economic developments on a country-by-country basis and are known as an...