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A Critical Look at Measures of Macroeconomic Uncertainty

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Author Info
Kjellberg, David (Department of Economics)
Post, Erik () (Department of Economics)

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Abstract

This paper takes a critical look at available proxies of uncertainty. Two questions are adressed: (i) How do we evaluate proxies given that subjective uncertainty is inherently unobservable? (ii) Is there such a thing as a general macroeconomic uncertainty? Using correlations, some narrative evidence and a factor analysis we find that disagreement and stock market volatility proxies seem to be valid measures of uncertainty whereas probability forecast measures are not. This result is reinforced when we use our proxies in standard macroeconomic applications where uncertainty is supposed to matter. Uncertainty is positively correlated with the absolute value of the GDP-gap.

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Publisher Info
Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2007:14.

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Length: 27 pages
Date of creation: 28 Feb 2007
Date of revision:
Handle: RePEc:hhs:uunewp:2007_014

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
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Related research
Keywords: Uncertainty; Macroeconomics; Survey Data;

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Find related papers by JEL classification:
C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Carlsson, Mikael & Westermark, Andreas, 2006. "Monetary Policy and Staggered Wage Bargaining when Prices are Sticky," Working Paper Series 199, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
    Other versions:
  2. Blomquist, Sören & Christiansen, Vidar, 2007. "Public Provision of Private Goods and Nondistortionary Marginal Tax Rates," Working Paper Series 2007:7, Uppsala University, Department of Economics. [Downloadable!]
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  3. Ohlsson, Henry, 2007. "Tax avoidance - a natural experiment," Working Paper Series 2007:13, Uppsala University, Department of Economics. [Downloadable!]
  4. Ohlsson, Henry, 2007. "The equal division puzzle – empirical evidence on intergenerational transfers in Sweden," Working Paper Series 2007:10, Uppsala University, Department of Economics. [Downloadable!]
  5. Elinder, Mikael, 2006. "Local Economies and General Elections," Working Paper Series 2007:1, Uppsala University, Department of Economics. [Downloadable!]
  6. Jordahl, Henrik & Liang, Che-Yuan, 2006. "Merged Municipalities, Higher Debt: On Free-riding and the Common Pool Problem in Politics," Working Paper Series 679, Research Institute of Industrial Economics. [Downloadable!]
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  7. Ouarda Merrouche, 2007. "The Long Term Effect of Education Spending Decentralization on Human Capital in Spain," Working Papers 200708, Geary Institute, University College Dublin. [Downloadable!]
  8. Andersson, Christian, 2007. "Teacher density and student achievement in Swedish compulsory schools," Working Paper Series 2007:5, Uppsala University, Department of Economics. [Downloadable!]
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  9. Post, Erik, 2006. "Foreign exchange market interventions as monetary policy," Working Paper Series 2006:21, Uppsala University, Department of Economics. [Downloadable!]
  10. Österholm, Pär, 2006. "Incorporating Judgement in Fan Charts," Working Paper Series 2006:30, Uppsala University, Department of Economics. [Downloadable!]
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  11. Tobias Lindhe & Jan Södersten, 2006. "The Equity Trap, the Cost of Capital and the Firm’s Growth Path," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  12. Edmark, Karin & Ågren, Hanna, 2006. "Identifying Strategic Interactions in Swedish Local Income Tax Policies," Working Paper Series 2006:22, Uppsala University, Department of Economics. [Downloadable!]
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  13. Ågren, Martin, 2006. "Prospect Theory and Higher Moments," Working Paper Series 2006:24, Uppsala University, Department of Economics. [Downloadable!]
  14. Björnerstedt, Jonas & Westermark, Andreas, 2006. "Delay in Bargaining with Externalities," Working Paper Series 2006:29, Uppsala University, Department of Economics. [Downloadable!]
  15. Post, Erik, 2007. "Macroeconomic imbalances and exchange rate regime shifts," Working Paper Series 2007:4, Uppsala University, Department of Economics. [Downloadable!]
  16. Holmlund, Bertil & Liu, Qian & Nordström Skans, Oskar, 2006. "Mind the Gap? Estimating the Effects of Postponing Higher Education," Working Paper Series 2006:17, Uppsala University, Department of Economics. [Downloadable!]
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  17. Hallberg, Daniel, 2006. "Cross-national differences in income poverty among Europe´s 50+," Working Paper Series 2006:14, Uppsala University, Department of Economics. [Downloadable!]
  18. Ågren, Martin, 2006. "Does Oil Price Uncertainty Transmit to Stock Markets?," Working Paper Series 2006:23, Uppsala University, Department of Economics. [Downloadable!]
  19. Hallberg, Daniel & Lagergren, Mårten, 2007. "Moving in and out of public geriatric care in Sweden," Working Paper Series 2007:11, Uppsala University, Department of Economics. [Downloadable!]
  20. Engström, Per & Kolm, Ann-Sofie & Liang, Che-Yuan, 2006. "Maternal Addiction to Parental Leave," Working Paper Series 2006:28, Uppsala University, Department of Economics. [Downloadable!]
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  21. Chen, Jie, 2006. "Housing Wealth and Aggregate Consumption in Sweden," Working Paper Series 2006:16, Uppsala University, Department of Economics. [Downloadable!]
  22. Engström, Per, 2007. "Wage Formation and Redistribution," Working Paper Series 2007:12, Uppsala University, Department of Economics. [Downloadable!]
  23. Merrouche, Ouarda, 2007. "The Long Term Effect of Education Spending Decentralization on Human Capital in Spain," Working Paper Series 2007:3, Uppsala University, Department of Economics. [Downloadable!]
  24. Merrouche, Ouarda, 2007. "The Long Term Impact of French Settlement on Education in Algeria," Working Paper Series 2007:2, Uppsala University, Department of Economics. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ohlsson, Henry, 2007. "The legacy of the Swedish gift and inheritance tax, 1884–2004," Working Paper Series 2007:23, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  2. Carlsson, Mikael & Lyhagen, Johan & Österholm, Pär, 2007. "Testing for Purchasing Power Parity in Cointegrated Panels," Working Paper Series 2008:1, Uppsala University, Department of Economics. [Downloadable!]
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  3. Liang, Che-Yuan, 2007. "Is There an Incumbency Advantage or a Cost of Ruling in Proportional Election Systems?," Working Paper Series 2007:28, Uppsala University, Department of Economics. [Downloadable!]
  4. Liang, Che-Yuan, 2008. "Collective Lobbying in Politics: Theory and Empirical Evidence from Sweden," Working Paper Series 2008:2, Uppsala University, Department of Economics. [Downloadable!]
  5. Dahlberg, Matz & Lundqvist, Heléne & Mörk, Eva, 2008. "Intergovernmental Grants and Bureaucratic Power," Working Paper Series 2008:12, Uppsala University, Department of Economics. [Downloadable!]
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  6. Alexius, Annika & Holmlund, Bertil, 2007. "Monetary Policy and Swedish Unemployment Fluctuations," Working Paper Series 2007:17, Uppsala University, Department of Economics. [Downloadable!]
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  7. Beechey, Meredith & Österholm, Pär, 2007. "The Rise and Fall of U.S. Inflation Persistence," Working Paper Series 2007:18, Uppsala University, Department of Economics. [Downloadable!]
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