American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Uncertainty and Economic Activity: Evidence from Business Survey Data
American Economic Journal: Macroeconomics
vol. 5,
no. 2, April 2013
(pp. 217–49)
Abstract
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)Citation
Bachmann, Rüdiger, Steffen Elstner, and Eric R. Sims. 2013. "Uncertainty and Economic Activity: Evidence from Business Survey Data." American Economic Journal: Macroeconomics 5 (2): 217–49. DOI: 10.1257/mac.5.2.217Additional Materials
JEL Classification
- C53 Forecasting Models; Simulation Methods
- C83 Survey Methods; Sampling Methods
- D81 Criteria for Decision-Making under Risk and Uncertainty
- E23 Macroeconomics: Production
- E27 Macroeconomics: Consumption, Saving, Production, Employment, and Investment: Forecasting and Simulation: Models and Applications
- E32 Business Fluctuations; Cycles
- E37 Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications