Deconstructing uncertainty

We develop aggregate and industry-level measures of uncertainty using the median absolute forecast errors drawn from a large firm-level dataset. First, we confirm that our aggregate measure of uncertainty (using all firms) behaves much like other uncertainty measures in the literature. Then we capture uncertainty within particular sectors of the economy using selected subsets of the forecasts. We find that industry uncertainty measures share a common factor that closely follows aggregate uncertainty, while also containing sector-specific information. We explore the economic impact of various sector-specific measures, finding that uncertainty measured among financial firms can have greater economic impact than uncertainty measured in the rest of the economy.