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Surprise and uncertainty indexes: real-time aggregation of real-activity macro surprises

Listed author(s):
  • Scotti, Chiara

I construct two daily, real-time, real activity indexes for the United States, Euro area, the United Kingdom, Canada, and Japan: (i) a surprise index that summarizes recent economic data surprises and measures optimism/pessimism about the state of the economy, and (ii) an uncertainty index that measures uncertainty related to the state of the economy. The surprise index preserves the properties of the underlying series in affecting asset prices, with the advantage of being a parsimonious summary measure of real-activity surprises. For the United States, the real-activity uncertainty index is compared to other proxies commonly used to measure uncertainty to show that when uncertainty is strictly related to real activity, it has a potentially milder impact on economic activity than when it also relates to the financial sector.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 1093.

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Length: 42 pages
Date of creation: 2013
Date of revision: 20 May 2016
Handle: RePEc:fip:fedgif:1093
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