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Economic Uncertainty Before and During the COVID-19 Pandemic

Author

Listed:
  • Dave Altig

    (Federal Reserve Bank of Atlanta)

  • Scott Baker

    (Northwestern University - Kellogg School of Management)

  • Jose Maria Barrero

    (Stanford University - Department of Economics)

  • Nick Bloom

    (Stanford University - Graduate School of Business)

  • Phil Bunn

    (Bank of England)

  • Scarlet Chen

    (Stanford University - Department of Economics)

  • Steven J. Davis

    (University of Chicago - Booth School of Business)

  • Brent Meyer

    (Federal Reserve Bank of Atlanta)

  • Emil Mihaylov

    (Federal Reserve Bank of Atlanta)

  • Paul Mizen

    (University of Nottingham - School of Economics)

  • Nick Parker

    (Federal Reserve Bank of Atlanta)

  • Thomas Renault

    (University Paris 1 Panthéon-Sorbonne)

  • Pawel Smietanka

    (Bank of England)

  • Greg Thwaites

    (University of Nottingham - School of Economics)

Abstract

We consider several economic uncertainty indicators for the US and UK before and during the COVID-19 pandemic: implied stock market volatility, newspaper-based economic policy uncertainty, twitter chatter about economic uncertainty, subjective uncertainty about future business growth, and disagreement among professional forecasters about future GDP growth. Three results emerge. First, all indicators show huge uncertainty jumps in reaction to the pandemic and its economic fallout. Indeed, most indicators reach their highest values on record. Second, peak amplitudes differ greatly – from an 80 percent rise (relative to January 2020) in two-year implied volatility on the S&P 500 to a 20-fold rise in forecaster disagreement about UK growth. Third, time paths also differ: Implied volatility rose rapidly from late February, peaked in mid-March, and fell back by late March as stock prices began to recover. In contrast, broader measures of uncertainty peaked later and then plateaued, as job losses mounted, highlighting the difference in uncertainty measures between Wall Street and Main Street.

Suggested Citation

  • Dave Altig & Scott Baker & Jose Maria Barrero & Nick Bloom & Phil Bunn & Scarlet Chen & Steven J. Davis & Brent Meyer & Emil Mihaylov & Paul Mizen & Nick Parker & Thomas Renault & Pawel Smietanka & Gr, 2020. "Economic Uncertainty Before and During the COVID-19 Pandemic," Working Papers 2020-88, Becker Friedman Institute for Research In Economics.
  • Handle: RePEc:bfi:wpaper:2020-88
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    File URL: https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_202088.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Forward-looking uncertainty measures; volatility; COVID-19; coronavirus;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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