Implications of Macroeconomic Volatility in the Euro Area

Hauzenberger, Niko; Böck, Maximilian; Pfarrhofer, Michael; Stelzer, Anna; Zens, Gregor

doi:10.2139/ssrn.3723428

Cited by 2 publications

(1 citation statement)

References 19 publications

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“…Some authors have included additional financial variables (Alessandri and Mumtaz 2019;Caldara et al 2016). Other authors have circumvented this issue by assessing uncertainty shocks in a multi-economy context (Crespo et al 2017;Hauzenberger et al 2018). Sekhposyan (2015, 2017) introduced an index that allows computing country-level contributions and helps to analyse the heterogeneity of uncertainty across countries.…”

Section: Resultsmentioning

confidence: 99%

On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables

Clavería

2020

J Bus Cycle Res

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We analyse the effects of aggregating the level of disagreement in survey-based expectations. With this aim, we construct several indicators based on two metrics of disagreement: the standard deviation of the balance and a geometric measure of discrepancy. We use data from business and consumer surveys in eleven European countries and the Euro Area. We evaluate the dynamic response of economic growth to shocks in agents' uncertainty gauged by the discrepancy measures in a bivariate vector autoregressive framework. We find that while the effect on economic activity to a shock in aggregate discrepancy is always negative for firms' disagreement, the effect to consumers' disagreement is positive in all countries except Italy. To shed some light regarding the effect of aggregating disagreement both across variables and economic agents on forecast accuracy, we also examine the predictive performance of the discrepancy indicators, using them to generate out-of-sample forecasts of economic growth. We do not find evidence that the aggregation of disagreement improves forecast accuracy. These findings are especially relevant when using cross-sectional dispersion of survey-based expectations of firms and households.

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Section: Resultsmentioning

confidence: 99%

On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables

Clavería

2020

J Bus Cycle Res

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Uncertainty indicators based on expectations of business and consumer surveys

Clavería

2020

Empirica

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In this study we evaluate the dynamic response of different macroeconomic variables to shocks in agents' perception of three dimensions of uncertainty (economic, inflation and employment). First, we apply a geometric indicator to compute the proportion of disagreement in business and consumer expectations of eight European countries and the Euro Area. Next, we use a bivariate vector autoregressive framework to estimate the impulse response functions to innovations in disagreement. While we find an adverse reaction in unemployment rates to shocks in discrepancy, results differ markedly between disagreement in business and in consumer surveys with regard to economic growth and inflation: shocks to manufacturing production discrepancy lead to a decrease in economic activity, as opposed to shocks to consumer economic discrepancy; and the opposite in the case of a shock in the perception of price uncertainty. Finally, we perform a forecasting exercise to assess the predictive performance of the disagreement indicators for different time horizons, obtaining more accurate out-of-sample recursive forecasts of economic growth with the indicators of discrepancy of manufacturing firms and, of unemployment with the indicators of consumer discrepancy. When compared to recursive autoregressive predictions used as a benchmark, we find that vector autoregressions with industry discrepancy tend to outperform the benchmark in more cases that models with indicators of consumer discrepancy.

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Implications of Macroeconomic Volatility in the Euro Area

Cited by 2 publications

References 19 publications

On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables

On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables

Uncertainty indicators based on expectations of business and consumer surveys

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