Uncertainty and Economic Activity: Evidence from Business Survey Data / Ruediger Bachmann, Steffen Elstner, Eric R. Sims.

Format:

Book

Author/Creator:

Bachmann, Ruediger.

Contributor:

National Bureau of Economic Research.

Elstner, Steffen.

Sims, Eric R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16143.

NBER working paper series no. w16143

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Uncertainty and Economic Activity

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

What is the impact of time-varying business uncertainty on economic activity? Using partly confidential business survey data from the U.S. and Germany in structural VARs, we find that positive innovations to business uncertainty lead to prolonged declines in economic activity. In contrast, their high-frequency impact is small. We find no evidence of the "wait-and-see"-effect - large declines of economic activity on impact and subsequent fast rebounds - that the recent literature associates with positive uncertainty shocks. Rather, positive innovations to business uncertainty have effects similar to negative business confidence innovations. Once we control for their low-frequency effect, we find little statistically or economically significant impact of uncertainty innovations on activity. We argue that high uncertainty events are a mere epiphenomenon of bad economic times: recessions breed uncertainty.

Notes:

Print version record

June 2010.