A New Real-Time Lens for Asia-Pacific Economic Risks

Developed by Iris Claus and Leo Krippner, the model analyzes monthly surveys of professional forecasters across 14 economies, including Australia, China, Japan, and India. By tracking shifts in GDP growth and inflation expectations, researchers can strip away calendar-related noise to create a clearer picture of macroeconomic uncertainty. The method proves particularly effective at isolating the nature of a crisis, such as the 1997 Asian Financial Crisis or the COVID-19 pandemic, by determining whether a shock is demand-driven or supply-side.

Distinguishing Policy Uncertainty from Macroeconomic Stress

The research challenges the common practice of using newspaper-based policy uncertainty indices as a proxy for actual economic stability. The findings indicate that while political rhetoric may spike during trade disputes, the underlying macroeconomic uncertainty—as measured by forecaster consensus—often remains more stable. This distinction is vital for central banks and investors; demand weakness suggests a need for monetary or fiscal support, whereas supply-driven inflation necessitates a more cautious approach to avoid stifling growth. While the model provides a sophisticated tool for stress testing and capital allocation, the authors caution that it should complement, not replace, official data and expert judgment. Future iterations aim to integrate interest rate data to further isolate monetary policy shocks from broader economic volatility.