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Macroeconomic uncertainty indices for the Euro Area and its individual member countries

Author

Listed:
  • Barbara Rossi

    (ICREA-Universitat Pompeu Fabra, Barcelona GSE and CREI)

  • Tatevik Sekhposyan

    (Texas A&M University)

Abstract

This paper introduces the Rossi and Sekhposyan (Am Econ Rev 105(5): 650–655, 2015) uncertainty index for the Euro Area and its member countries. The index captures how unexpected a forecast error associated with a realization of a macroeconomic variable is relative to the unconditional distribution of forecast errors. Furthermore, it can differentiate between upside and downside uncertainty, which could be relevant for addressing a variety of economic questions. The index is particularly useful since it can be constructed for any country/variable for which point forecasts and realizations are available. We show the usefulness of the index in studying the heterogeneity of uncertainty across Euro Area countries as well as the spillover effects via a network approach.

Suggested Citation

  • Barbara Rossi & Tatevik Sekhposyan, 2017. "Macroeconomic uncertainty indices for the Euro Area and its individual member countries," Empirical Economics, Springer, vol. 53(1), pages 41-62, August.
    • Handle: RePEc:spr:empeco:v:53:y:2017:i:1:d:10.1007_s00181-017-1248-z
    DOI: 10.1007/s00181-017-1248-z
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    References listed on IDEAS

    as
    1. N. Bloom, 2016. "Fluctuations in uncertainty," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 4.
    2. Rossi, Barbara & Sekhposyan, Tatevik & Soupré, Mattheiu, 2016. "Understanding the Sources of Macroeconomic Uncertainty," CEPR Discussion Papers 11415, C.E.P.R. Discussion Papers.
    3. Francis X. Diebold & Kamil Yilmaz, 2009. "Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets," Economic Journal, Royal Economic Society, vol. 119(534), pages 158-171, January.
    4. Joshua Abel & Robert Rich & Joseph Song & Joseph Tracy, 2016. "The Measurement and Behavior of Uncertainty: Evidence from the ECB Survey of Professional Forecasters," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(3), pages 533-550, April.
    5. Domenico Giannone & Jérôme Henry & Magdalena Lalik & Michele Modugno, 2012. "An Area-Wide Real-Time Database for the Euro Area," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1000-1013, November.
    6. Stefan Klößner & Sven Wagner, 2014. "Exploring All Var Orderings For Calculating Spillovers? Yes, We Can!—A Note On Diebold And Yilmaz (2009)," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(1), pages 172-179, January.
    7. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
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    14. Klößner, Stefan & Sekkel, Rodrigo, 2014. "International spillovers of policy uncertainty," Economics Letters, Elsevier, vol. 124(3), pages 508-512.
    15. Genre, Véronique & Kenny, Geoff & Meyler, Aidan & Timmermann, Allan, 2013. "Combining expert forecasts: Can anything beat the simple average?," International Journal of Forecasting, Elsevier, vol. 29(1), pages 108-121.
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    More about this item

    Keywords

    Uncertainty; Uncertainty index; Survey of Professional Forecasters; Euro Area macroeconomy; Spillovers;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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