The timing of uncertainty shocks in a small open economy

•Economic policy uncertainty is not measured in most small open economies.•We construct an economic policy uncertainty (EPU) index for Sweden.•Shocks to the Swedish EPU generate same-quarter responses in Swedish GDP.•Shocks to foreign EPUs impact Swedish GDP with a one-quarter delay.•The results also hold for the Netherlands.

Foreign measures of uncertainty, such as the US EPU index, are often used as a proxies for domestic uncertainty in small open economies. We construct an EPU index for Sweden and demonstrate that shocks to the domestic index yield different impulse response functions for GDP growth than shocks to the US index. In particular, a one standard deviation shock to the Swedish index delivers its maximum impact in the same quarter, lowering GDP growth by slightly less than 0.2 percentage points. In contrast, a shock to the US index delivers its maximum impact with a one-quarter delay. Other foreign proxies, such as the European and German indices, also generate effects that peak with a one-quarter delay.