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Measuring Uncertainty


  • Kyle Jurado
  • Sydney C. Ludvigson
  • Serena Ng


This paper exploits a data rich environment to provide direct econometric estimates of time-varying macroeconomic uncertainty, defined as the common volatility in the unforecastable component of a large number of economic indicators. Our estimates display significant independent variations from popular uncertainty proxies, suggesting that much of the variation in the proxies is not driven by uncertainty. Quantitatively important uncertainty episodes appear far more infrequently than indicated by popular uncertainty proxies, but when they do occur, they are larger, more persistent, and are more correlated with real activity. Our estimates provide a benchmark to evaluate theories for which uncertainty shocks play a role in business cycles.

Suggested Citation

  • Kyle Jurado & Sydney C. Ludvigson & Serena Ng, 2013. "Measuring Uncertainty," NBER Working Papers 19456, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19456
    Note: AP EFG

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    References listed on IDEAS

    1. Bekaert, Geert & Hoerova, Marie & Lo Duca, Marco, 2013. "Risk, uncertainty and monetary policy," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 771-788.
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    3. Andersen, Torben G. & Bollerslev, Tim & Christoffersen, Peter F. & Diebold, Francis X., 2013. "Financial Risk Measurement for Financial Risk Management," Handbook of the Economics of Finance, Elsevier.
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    6. Scott R. Baker & Nicholas Bloom, 2013. "Does Uncertainty Reduce Growth? Using Disasters as Natural Experiments," NBER Working Papers 19475, National Bureau of Economic Research, Inc.
    7. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    8. Ludvigson, Sydney C. & Ng, Serena, 2007. "The empirical risk-return relation: A factor analysis approach," Journal of Financial Economics, Elsevier, vol. 83(1), pages 171-222, January.
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    13. Kajal Lahiri & Xuguang Sheng, 2010. "Measuring forecast uncertainty by disagreement: The missing link," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 514-538.
    14. Emi Nakamura & Dmitriy Sergeyev & Jón Steinsson, 2017. "Growth-Rate and Uncertainty Shocks in Consumption: Cross-Country Evidence," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(1), pages 1-39, January.
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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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