Inferring the uncertainties in economic conditions are of significant importance for both decision makers as well as market players. In this paper, we propose a novel method based on Hidden Markov Model (HMM) to construct the Economic Condition Uncertainty (ECU) index that can be used to infer the economic condition uncertainties. The ECU index is a dimensionless index ranges between zero and one, this makes it to be comparable among sectors, regions and periods. We use the daily electricity consumption data of nearly 20 thousand firms in Shanghai from 2018 to 2020 to construct the ECU indexes. Results show that all ECU indexes, no matter at sectoral level or regional level, successfully captured the negative impacts of COVID-19 on Shanghais economic conditions. Besides, the ECU indexes also presented the heterogeneities in different districts as well as in different sectors. This reflects the facts that changes in uncertainties of economic conditions are mainly related to regional economic structures and targeted regulation policies faced by sectors. The ECU index can also be easily extended to measure uncertainties of economic conditions in different fields which has great potentials in the future.
Download