American Economic Journal Macroeconomics· 2013Q1
Uncertainty and Economic Activity: Evidence from Business Survey Data
- 1,022citations
- Q1SCImago
- 2013year
Short summary
Surprise increases in business uncertainty, measured by forecast disagreement, lead to significant, albeit temporary, reductions in production, with US data showing more persistent effects than German data.
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Key points
- Uncertainty measures constructed from survey expectations (forecast disagreement, forecast errors).
- Ex ante disagreement strongly correlates with ex post forecast errors.
- Surprise increases in uncertainty lead to significant, temporary reductions in production.
- US data shows more persistent production reductions from uncertainty shocks than German data.
AI-generated from the title and abstract; the full text is not read.
Abstract
This paper uses survey expectations data to construct empirical proxies for time-varying business-level uncertainty. Access to the micro data from the German IFO Business Climate Survey permits construction of uncertainty measures based on both ex ante disagreement and ex post forecast errors. Ex ante disagreement is strongly correlated with dispersion in ex post forecast errors. Surprise movements in either measure lead to significant reductions in production that abate fairly quickly. We extend our analysis to US data, measuring uncertainty with forecast disagreement from the Business Outlook Survey. Surprise increases in forecast dispersion lead to more persistent reductions in production than in the German data. (JEL C53, C83, D81, E23, E27, E32, E37)
The authors' abstract, as published at the source. American Economic Journal Macroeconomics, 2013 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance