Working Paper

A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area

Abstract: This paper examines point and density forecasts of real GDP growth, inflation and unemployment from the European Central Bank?s Survey of Professional Forecasters. We present individual uncertainty measures and introduce individual point- and density-based measures of disagreement. The data indicate substantial heterogeneity and persistence in respondents? uncertainty and disagreement, with uncertainty associated with prominent respondent effects and disagreement associated with prominent time effects. We also examine the co-movement between uncertainty and disagreement and find an economically insignificant relationship that is robust to changes in the volatility of the forecasting environment. This provides further evidence that disagreement is not a reliable proxy for uncertainty.

Keywords: disagreement; uncertainty; point forecasts; density forecasts; heterogeneity; ECB Survey of Professional Forecasters; ;

JEL Classification: C10; C23; E37;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2018-09-28

Number: 1813

Pages: 33 pages