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Macroeconomic Uncertainty Through the Lens of Professional Forecasters

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  • Soojin Jo
  • Rodrigo Sekkel

Abstract

We analyze the evolution of macroeconomic uncertainty in the United States, based on the forecast errors of consensus survey forecasts of different economic indicators. Comprehensive information contained in the survey forecasts enables us to capture a real-time subjective measure of uncertainty in a simple framework. We jointly model and estimate macroeconomic (common) and indicator-specific uncertainties of four indicators, using a factor stochastic volatility model. Our macroeconomic uncertainty has three major spikes, aligned with the 1973–75, 1980, and 2007–09 recessions, while other recessions were characterized by increases in indicator-specific uncertainties. We also demonstrate for the first time in the literature that the selection of data vintages substantially affects the relative size of jumps in estimated uncertainty series. Finally, our macroeconomic uncertainty has a persistent negative impact on real economic activity, rather than producing “wait-and-see” dynamics.

Suggested Citation

  • Soojin Jo & Rodrigo Sekkel, 2016. "Macroeconomic Uncertainty Through the Lens of Professional Forecasters," Staff Working Papers 16-5, Bank of Canada.
  • Handle: RePEc:bca:bocawp:16-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Business fluctuations and cycles; Econometric and statistical methods;

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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