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Unpacking Economic Uncertainty — Measuring the Firm, Sector and Aggregate Components

Author

Listed:
  • Siavash Mohades
  • Giulia Piccillo
  • Tania Treibich

Abstract

We introduce a novel method for measuring economic uncertainty at the firm, sector, and aggregate levels using sales volatility and validate it by comparison with existing macroeconomic uncertainty measures. We use Compustat firms data in the period 2000-2022 to construct our uncertainty measures for the U.S. economy. Our findings highlight that 1) macroeconomic conditions are the predominant source of firms’ uncertainty, 2) diverse firm traits yield notable heterogeneity, and 3) the manufacturing sector exhibits the highest uncertainty among sectors. Our findings shed light on the importance of firm and sectoral heterogeneity in studying uncertainty and its effects on economic activity.

Suggested Citation

  • Siavash Mohades & Giulia Piccillo & Tania Treibich, 2024. "Unpacking Economic Uncertainty — Measuring the Firm, Sector and Aggregate Components," CESifo Working Paper Series 10974, CESifo.
    • Handle: RePEc:ces:ceswps:_10974
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    References listed on IDEAS

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    5. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 671-698.
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    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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