This paper presents a new index of economic policy uncertainty (EPU) based on newspaper coverage frequency. The index is constructed using the frequency of articles in 10 leading US newspapers that contain the terms "economic" or "economy," "uncertain" or "uncertainty," and one or more of "congress," "deficit," "Federal Reserve," "legislation," "regulation," or "White House." The index shows spikes near tight presidential elections, Gulf Wars I and II, the 9/11 attacks, the failure of Lehman Brothers, and other major fiscal policy battles. The index is extended back to 1900 and shows dramatic increases in the 1930s and a drift upwards since the 1960s. The paper finds that policy uncertainty raises stock price volatility and reduces investment and employment in policy-sensitive sectors like defense, healthcare, and infrastructure construction. At the macro level, policy uncertainty innovations foreshadow declines in investment, output, and employment in the United States and 12 major economies. The paper also constructs EPU indices for 11 other countries, including all G10 economies, and category-specific indices for the US, such as healthcare and national security policy uncertainty. The paper evaluates the EPU index using several methods, including an audit study of 12,000 newspaper articles, comparisons to other measures of uncertainty, and analysis of firm-level data. The audit study shows a strong relationship between the EPU index and other measures of economic uncertainty, such as implied stock-market volatility. The paper also finds that the EPU index is not significantly affected by political slant in newspaper coverage. Using firm-level data, the paper finds that firms with greater exposure to government purchases respond to policy uncertainty with heightened stock price volatility and reduced investment and employment. The paper also finds that firms in the defense, healthcare, and financial sectors are especially responsive to their own category-specific EPU measures. The paper uses vector autoregressive (VAR) models to analyze the effects of policy uncertainty on the economy. The results show that a policy uncertainty innovation equivalent to the actual EPU increase from 2005-06 to 2011-12 foreshadows declines in gross investment, industrial production, and employment. The paper concludes that policy uncertainty has significant effects on investment, hiring, and growth in policy-sensitive sectors like defense, healthcare, and construction.This paper presents a new index of economic policy uncertainty (EPU) based on newspaper coverage frequency. The index is constructed using the frequency of articles in 10 leading US newspapers that contain the terms "economic" or "economy," "uncertain" or "uncertainty," and one or more of "congress," "deficit," "Federal Reserve," "legislation," "regulation," or "White House." The index shows spikes near tight presidential elections, Gulf Wars I and II, the 9/11 attacks, the failure of Lehman Brothers, and other major fiscal policy battles. The index is extended back to 1900 and shows dramatic increases in the 1930s and a drift upwards since the 1960s. The paper finds that policy uncertainty raises stock price volatility and reduces investment and employment in policy-sensitive sectors like defense, healthcare, and infrastructure construction. At the macro level, policy uncertainty innovations foreshadow declines in investment, output, and employment in the United States and 12 major economies. The paper also constructs EPU indices for 11 other countries, including all G10 economies, and category-specific indices for the US, such as healthcare and national security policy uncertainty. The paper evaluates the EPU index using several methods, including an audit study of 12,000 newspaper articles, comparisons to other measures of uncertainty, and analysis of firm-level data. The audit study shows a strong relationship between the EPU index and other measures of economic uncertainty, such as implied stock-market volatility. The paper also finds that the EPU index is not significantly affected by political slant in newspaper coverage. Using firm-level data, the paper finds that firms with greater exposure to government purchases respond to policy uncertainty with heightened stock price volatility and reduced investment and employment. The paper also finds that firms in the defense, healthcare, and financial sectors are especially responsive to their own category-specific EPU measures. The paper uses vector autoregressive (VAR) models to analyze the effects of policy uncertainty on the economy. The results show that a policy uncertainty innovation equivalent to the actual EPU increase from 2005-06 to 2011-12 foreshadows declines in gross investment, industrial production, and employment. The paper concludes that policy uncertainty has significant effects on investment, hiring, and growth in policy-sensitive sectors like defense, healthcare, and construction.