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EPU: Signs of economic uncertainty increase in October

After a relatively elevated but stable period of about six months, economic uncertainty in Cyprus increased again in October with the EPU index estimated at 256.63 compared to its 202.84 value in September.

The Economics Research Centre of the University of Cyprus constructs the corresponding Economic Policy Uncertainty (EPU) index for Cyprus and analyses the effects of economic uncertainty on the Cypriot economy. The present bulletin refers to a research programme of the Economics Research Centre in association with the Ministry of Finance of Cyprus.

In a press release, the ERC said that the notable shift in October is partly attributed to the recent outbreak of the war between Israel and Gaza on 7 October. This peak is observed in Cyprus EPU index because of its geographical proximity to the conflict area, contrary to the European EPU index which does not seem to have been affected by the war yet.

The EPU index was introduced by Baker, Bloom and Davis in 2016. It is an index that quantifies economic uncertainty with regard to the efficiency of the economic policies applied. The Economics Research Centre of the University of Cyprus found that uncertainty in Cyprus until 2007 was on average lower and less volatile, while after 2008 it started increasing, with the higher peaks being recorded in 2012 due to the banking crisis, in 2020 due to the Covid-19 pandemic, and in 2022 due to the Russia-Ukraine war.

(Source: CNA)

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