A data-rich measure of macroeconomic uncertainty in an open economy: evidence from Mexico

This paper constructs a data-rich, time-varying measure of macroeconomic uncertainty for Mexico using over 140 domestic, financial, trade, and external variables. The index fills key gaps in the literature for emerging economies, where high-dimensional measures and the role of external information remain underexplored. The full-data measure is highly persistent (AR1=0.95; half-life = 12.54 months), exhibits heavier tails, and shows fewer politically driven spikes than the Mexico Policy Uncertainty Index and World Uncertainty Index for Mexico. Uncertainty shocks are recessionary: industrial production falls by up to 0.27 points, unemployment rises by 0.18 points, the MXN/USD rate increases by 0.10, and the 28-day interbank rate declines by −0.17. FEVD results indicate that uncertainty explains up to 14.2% of short-term industrial-activity volatility. In the external-shock extension, oil shocks explain only ≈1% of uncertainty, while the exchange rate explains 19–21% of its short-run variance, making it the dominant transmission channel. These features make the index useful for forecasting, risk assessment, and policy analysis.