Working Paper

Macroeconomic Uncertainty Through the Lens of Professional Forecasters

Abstract: We analyze the evolution of macroeconomic uncertainty in the United States, based on the forecast errors of consensus survey forecasts of various economic indicators. Comprehensive information contained in the survey forecasts enables us to capture a real-time subjective measure of uncertainty in a simple framework. We jointly model and estimate macroeconomic (common) and indicator-specific uncertainties of four indicators, using a factor stochastic volatility model. Our macroeconomic uncertainty has three major spikes aligned with the 1973?75, 1980, and 2007?09 recessions, while other recessions were characterized by increases in indicator-specific uncertainties. We also show that the selection of data vintages affects the estimates and relative size of jumps in estimated uncertainty series. Finally, our macroeconomic uncertainty has a persistent negative impact on real economic activity, rather than producing ?wait-and-see? dynamics.

Keywords: Factor stochastic volatility model; survey forecasts; Uncertainty;

https://doi.org/10.24149/wp1702

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Working Papers

Publication Date: 2017-01-26

Number: 1702

Pages: 36 pages