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The Relation Between Macroeconomic Uncertainty And The Expected Performance Of the Economy

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  • Jean Sepulveda-Umanzor

Abstract

By using data from surveys of expectations, it is shown that macroeconomic uncertainty, measured by the standard deviation of the expected output growth, the expected unemployment rate, and the expected inflation rate, is negatively related to the expected performance of the economy, proxied by the expected growth rate of output. That is, forward-looking agents are more uncertain about the future development of output, unemployment, and inflation when the growth rate of output is expected to fall, and they are less uncertain when this growth rate is expected to increase. The findings indicate that macroeconomic polices would have asymmetric effects on output depending upon how economic agents expect the economy to perform in the near future

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File URL: http://repec.org/esLATM04/up.10633.1082126441.pdf
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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 304.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:latm04:304

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Keywords: Macroeconomic uncertainty; expectations; expected macroeconomic performance;

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  1. Cover, James Peery, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1261-82, November.
  2. Zarnowitz, Victor & Lambros, Louis A, 1987. "Consensus and Uncertainty in Economic Prediction," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 591-621, June.
  3. N. Gregory Mankiw & Ricardo Augusto Marc Rocha Reis & Justin Wolfers, 2004. "Disagreement about Inflation Expectations," Yale School of Management Working Papers ysm391, Yale School of Management.
  4. Dean Croushore, 1997. "The Livingston Survey: still useful after all these years," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 15-27.
  5. Logue, Dennis E & Willett, Thomas D, 1976. "A Note on the Relation between the Rate and Variability of Inflation," Economica, London School of Economics and Political Science, vol. 43(17), pages 151-58, May.
  6. Giordani, Paolo & Soderlind, Paul, 2000. "Inflation Forecast Uncertainty," Working Paper Series in Economics and Finance 384, Stockholm School of Economics, revised 09 Oct 2000.
  7. Lahiri, Kajal & Teigland, Christie & Zaporowski, Mark, 1988. "Interest Rates and the Subjective Probability Distribution of Inflation Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 233-48, May.
  8. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
  9. Victor Zarnowitz & Louis A. Lambros, 1983. "Consensus and Uncertainty in Economic Prediction," NBER Working Papers 1171, National Bureau of Economic Research, Inc.
  10. John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
  11. Bomberger, William A, 1996. "Disagreement as a Measure of Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(3), pages 381-92, August.
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Cited by:
  1. Kjellberg, David & Post, Erik, 2007. "A Critical Look at Measures of Macroeconomic Uncertainty," Working Paper Series 2007:14, Uppsala University, Department of Economics.
  2. Mario Quagliariello, 2006. "Macroeconomics Uncertainty and Banks' Lending Decisions: The Case of Italy," Discussion Papers 06/02, Department of Economics, University of York.
  3. Stangl, Anna, 2009. "Essays on the Measurement of Economic Expectations," Munich Dissertations in Economics 9823, University of Munich, Department of Economics.

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