our firepower be well aimed. indices of policy uncertainty are about 1¼ times their pre - crisis averages in the us and japan, and as high as three times in china. in the uk, progress since the financial crisis has been more than totally unwound this year with the measure having risen to five times its precrisis average by the start of the official referendum campaign ( chart 3 ). a closely watched measure of economic uncertainty – the vix – spiked when the global financial crisis hit. measures that combine this with other sources of economic uncertainty, such as dispersion among forecasters ’ growth projections, households ’ unemployment expectations, and currency volatility, show clear variation over time, and rise at times of economic stress. see haddow, a, hare, c, hooley, j and shakir, t ( 2013 ) “ macroeconomic uncertainty : what is it, how can we measure it and why does it matter? ”, bank of england quarterly bulletin, q2. one way some of this has been measured is again to count occurrences in media articles of references to economics, uncertainty, and policy terms like “ deficit ”, “ regulation ” or terms relating to monetary policy. see : baker, s, bloom, n and davis, s ( 2015 ), “ measuring economic policy uncertainty ”, nber working paper no. 21633, october. bis central bankers ’ speeches while clearly these three uncertainty measures are related, distinct movements are visible. the heady days of the great moderation were restrained by geopolitical uncertainty. during the financial and euro crises, by contrast, economic uncertainty dominated. and from 2012 onwards, with the abatement of the acute phase of the euro - area crisis, economic uncertainty began to fall back, only to be replaced by renewed geopolitical tensions and now sharply higher policy uncertainty ( chart 4 ). chart 3 uk economic policy uncertainty has increased since the global financial crisis, rising sharply higher in early 2016 source : bank calculations and baker et al, ( 2015 ), ibid. chart 4 three eras of uncertainty : geopolitical from 9 / 11 to 2008 ; economic uncertainty from 2008 to 2012 ; and policy uncertainty today source : bank calculations and authors cited in charts 1 – 3 above. economic policy and geopolitical uncertainty indices are de - meaned and shown relative to their respective standard deviations. chart shows two - year centred moving average for each measure. bis central bankers ’ speeches 2.

10 - year government bond yield. - 2 source : imf, bloomberg, thomson reuters datastream and bank calculations. the equity - bond yield spread is the difference between the reciprocal of the ftse allshare price - earnings ratio and the uk 10 - year government bond yield. the growth contribution is calibrated from the imf 5 - year - ahead world growth and inflation forecasts. the erp contribution is calibrated using the var model described in chin and polk ( 2015 ), “ a forecast evaluation of expected equity return measures ”, bank of england working paper, no. 520. the serial disappointment in earnings growth is mirrored in global growth since the crisis ( chart 9 ). in advanced economies, uncertainty appears to be holding back spending, particularly by corporates. globally, investment remains weak ( charts 10 and 11 ). in the uk, relatively strong business investment growth in the past few years has only restored it to a level still shy of its pre - crisis share of gdp ( chart 12 ), and it is tracking below past cycles ( chart 13 ). a fall in expected growth rates will tend to push down on expected future earnings, lowering equity prices and increasing the equity yield. at the same time, a fall in growth expectations will tend to be reflected in a lower expected path of risk - free rates, pushing down on bond yields. so a decline in growth expectations will tend to widen the spread between equity and bond yields. since equity prices depend on earnings expectations at all future horizons, the equity yield ( and hence the equity - bond yield spread ) will be particularly sensitive to expectations about growth rates at long horizons bis central bankers ’ speeches chart 9 consistent downward revisions to gdp growth forecasts actual gdp growth per cent 8. 0 dotted lines = emerging economies solid lines = advanced economies 6. 0 4. 0 2. 0 0. 0 source : imf world economic outlook. each line shows how forecasts for a particular calendar year have evolved over time. the diamond shows the eventual outturn. chart 10 chart 11 whole economy real investment substantially weaker than pre - crisis forecasts advanced economy investment has fallen relative to gdp, remains lower than past episodes residual non - residential total equipment residential per cent pp fall in investment share of gdp 1. 0 - 10 0. 5 - 20 0. 0 - 0. 5 - 30 - 1. 0 - 40 - 1. 5 - 50 - 2. 0 - 2. 5 - 3. 0 sweden switzerland germany uk