Measuring Fiscal Policy Uncertainty: The Case of Egypt

ABSTRACT Fiscal policy is a key tool for achieving economic and fiscal stability, and uncertainty about it significantly affects the economic decisions on investment, employment, consumption, and saving. With increasing recognition of its importance, expressing uncertainty quantitatively has become urgent. However, progress in measuring it is still largely limited to developed economies. This study proposes a new composite index of fiscal policy uncertainty (FPU) in Egypt based on a combination of fiscal policy indicators over the period from 1982 to 2023. VAR modeling shows that FPU mostly impacts inflation and real interest rates, with a minor effect on real economic variables.