Comparing perceptions and expressions of policy uncertainty

Abstract

Orientation: Policy uncertainty imposes real economic costs. South African policymakers and business analysts now have access to two concurrently published indices: the perceptions-based North-West University Policy Uncertainty Index (PUI) and the Phronesis Analytics Expressed Policy Uncertainty Index (EPUI). Both claim to measure policy uncertainty, but they use different methods and information sources. No prior study has characterised when and why they diverge.
Research purpose: This article provides the first quantitative characterisation of co-movement and divergence between the PUI and EPUI over their overlap period (2015Q3–2021Q4).
Motivation for the study: The aim is to identify the conditions under which each index provides distinct information, enabling practitioners to make informed decisions about which index to monitor for specific purposes.
Research approach/design and method: We compare the two indices using z-score standardisation, cross-correlation functions, Granger causality tests and Ordinary Least Squares (OLS) regression.
Main findings: The two indices are weakly correlated (r = −0.18), confirming they capture different dimensions of policy uncertainty. The PUI shows a significant negative relationship with business confidence (r = −0.48, p < 0.05) and leads business confidence by one to two quarters. The EPUI does not show a comparable pattern. The 2016Q3 episode illustrates the practical stakes: the PUI and EPUI gave contradictory signals that quarter, and an analyst relying on either index alone would have received an incomplete picture.
Practical/managerial implications: Practitioners should monitor both indices simultaneously. When they diverge, the divergence itself carries information about the mismatch between expressed and perceived uncertainty.
Contribution/value-add: This article provides the first quantitative comparison of the PUI and EPUI, characterises their divergence patterns and enables informed index selection.