Google Trends Topic-Based Uncertainty: A Multi-National Approach

Several studies have shown that uncertainty among economic actors influences business cycle dynamics. This paper uses Google Trends topic queries to construct an uncertainty proxy that can be applied to every country where Google is active. Using a VAR approach, this paper demonstrates that the obtained impulse-response functions of main economic indicators to a one-standard deviation shock to the constructed indicator, are similar to those from an already-existing uncertainty proxy, the EPU. This is true for the G7 countries and Russia. On average, the uncertainty indicator constructed for this paper leads to more statistically significant responses than does the EPU. Thus, this paper shows that Google Trends is a helpful tool for obtaining timely information about uncertainty among economic actors. The main improvement in this uncertainty proxy is in its language independence. Existing uncertainty-measurement approaches, in contrast, rely on certain keywords that often vary across countries.

The Vanishing Procyclicality of Labour Productivity

We document two changes in post-war US macroeconomic dynamics: the procyclicality of labour productivity vanished, and the relative volatility of employment rose. We propose an explanation for these changes that is based on reduced hiring frictions due to improvements in information about the quality of job matches and the resulting decline in turnover. We develop a simple model with hiring frictions and variable effort to illustrate the mechanisms underlying our explanation. We show that our model qualitatively and quantitatively matches the observed changes in business cycle dynamics.