EPU can be defined as economic agents
In short, EPU can be defined as economic agents being unable to foresee the
outcomes of fiscal, regulatory, monetary and trade policies. To give an example,
ambiguity surrounding fiscal integration within the EU – which some member
countries are in favour of, while others strongly oppose it – creates significant
unpredictability.
Since fiscal integration has a decisive influence on taxation –
and thereby the cost of production, demand, and even firms’ competitive
advantage – European firms might postpone their investment and hiring
decisions to see the outcome of the discussions first. This wait-and-see
approach, however, may detrimentally affect the real economy and sustainable
recovery in Europe. Even though it is easy to define cornerstones of EPU
conceptually, EPU is inherently unobservable, and its estimation is not
straightforward.
In recent years, though, there have been significant steps
forward in EPU measurement with the advancement of textual analysis
EU Forecast
euf:ba18.d:9/nws-01