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Uncertainty and Economic Activity: Evidence from Business Survey Data

  • Steffen Elstner

    (IFO Institute)

  • Eric Sims

    (University of Notre Dame)

  • Ruediger Bachmann

    (University of Michigan)

This paper uses survey expectations data to construct empirical proxies for time-varying business-level uncertainty. Access to the micro data from the German IFO Business Climate Survey permits construction of uncertainty measures based on both ex ante disagreement and ex post forecast errors. Ex ante disagreement is strongly correlated with dispersion in ex post forecast errors. Surprise movements in either measure lead to significant reductions in production that abate fairly quickly. We extend our analysis to US data, measuring uncertainty with forecast disagreement from the Business Outlook Survey. Surprise increases in forecast dispersion lead to more persistent reductions in production than in the German data. (JEL C53, C83, D81, E23, E27, E32, E37)

(This abstract was borrowed from another version of this item.)

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 614.

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Date of creation: 2010
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Handle: RePEc:red:sed010:614
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  1. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta-Eksten & Stephen Terry, 2013. "Really uncertain business cycles," LSE Research Online Documents on Economics 51526, London School of Economics and Political Science, LSE Library.
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  10. Sascha O. Becker & Klaus Wohlrabe, 2008. "European Data Watch: Micro Data at the Ifo Institute for Economic Research – The “Ifo Business Survey”, Usage and Access," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 128(2), pages 307-319.
  11. Sascha O. Becker & Klaus Wohlrabe, 2007. "Micro Data at the Ifo Institute for Economic Research – The “Ifo Business Survey”, Usage and Access," Ifo Working Paper Series Ifo Working Paper No. 47, Ifo Institute for Economic Research at the University of Munich.
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  16. repec:aeq:aeqsjb:v128:y2008:i2:q2:p307-319 is not listed on IDEAS
  17. Catherine Fuss & Philip Vermeulen, 2004. "Firms' investment decisions in response to demand and price uncertainty," Working Paper Research 45, National Bank of Belgium.
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