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The Relation Between Macroeconomic Uncertainty And The Expected Performance Of the Economy

  • Jean Sepulveda-Umanzor

By using data from surveys of expectations, it is shown that macroeconomic uncertainty, measured by the standard deviation of the expected output growth, the expected unemployment rate, and the expected inflation rate, is negatively related to the expected performance of the economy, proxied by the expected growth rate of output. That is, forward-looking agents are more uncertain about the future development of output, unemployment, and inflation when the growth rate of output is expected to fall, and they are less uncertain when this growth rate is expected to increase. The findings indicate that macroeconomic polices would have asymmetric effects on output depending upon how economic agents expect the economy to perform in the near future

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File URL: http://repec.org/esLATM04/up.10633.1082126441.pdf
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Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 304.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:latm04:304
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  1. Victor Zarnowitz & Louis A. Lambros, 1983. "Consensus and Uncertainty in Economic Prediction," NBER Working Papers 1171, National Bureau of Economic Research, Inc.
  2. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
  3. Lahiri, Kajal & Teigland, Christie & Zaporowski, Mark, 1988. "Interest Rates and the Subjective Probability Distribution of Inflation Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 233-48, May.
  4. Söderlind, Paul, 2000. "Inflation Forecast Uncertainty," CEPR Discussion Papers 2499, C.E.P.R. Discussion Papers.
  5. Dean Croushore, 1997. "The Livingston Survey: still useful after all these years," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 15-27.
  6. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February.
  7. N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2003. "Disagreement about Inflation Expectations," Harvard Institute of Economic Research Working Papers 2011, Harvard - Institute of Economic Research.
  8. Cover, James Peery, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1261-82, November.
  9. Logue, Dennis E & Willett, Thomas D, 1976. "A Note on the Relation between the Rate and Variability of Inflation," Economica, London School of Economics and Political Science, vol. 43(17), pages 151-58, May.
  10. Zarnowitz, Victor & Lambros, Louis A, 1987. "Consensus and Uncertainty in Economic Prediction," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 591-621, June.
  11. Bomberger, William A, 1996. "Disagreement as a Measure of Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(3), pages 381-92, August.
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