TY - UNPD A1 - Fendel, Ralf A1 - Mai, Nicola A1 - Mohr, Oliver T1 - The shape of Eurozone’s uncertainty N2 - This paper examines the role of uncertainty in the context of the business cycle in the Eurozone. To gain a more granular perspective on uncertainty, the paper decomposes uncertainty along two dimensions: First, we construct the four different moments of uncertainty, including the point estimate, the standard deviation, the skewness and the kurtosis. The second dimension of uncertainty spans along three distinct groups of economic agents, including consumers, corporates and financial markets. Based on this taxonomy, we construct uncertainty indices and assess the impact on real GDP via impulse response functions and further investigate their informational value in rolling out-of-sample GDP forecasts. The analysis lends evidence to the hypothesis that higher uncertainty expressed through the point estimate, a larger standard deviation among confidence estimates, positive skewness and a higher kurtosis are all negatively correlated with the business cycle. The impulse response functions reveal that in particular the first and the second moment of uncertainty cause a permanent effect on GDP with an initial decline and a subsequent overshoot. We find uncertainty in the corporate sector to be the main driver behind this observation, followed by financial markets’ uncertainty whose initial effect on GDP is comparable but receding much faster. While the first two moments of uncertainty improve GDP forecasts significantly, both the skewness and the kurtosis do not augment the forecast quality any further. T3 - WHU – Working Paper Series in Economics - WP 19/01 KW - Europäische Union KW - European Union KW - Eurozone KW - Eurozone KW - Geschäftszyklus KW - Business cycle KW - Bruttoinlandsprodukt KW - Gross domestic product KW - Prognose KW - Forecasting KW - Unsicherheit KW - Uncertainty KW - Vektorautoregressives Modell KW - Vector autoregression Y1 - 2019 UR - https://opus4.kobv.de/opus4-whu/frontdoor/index/index/docId/741 UR - https://nbn-resolving.org/urn:nbn:de:hbz:992-opus4-7415 PB - WHU - Otto Beisheim School of Management CY - Vallendar ER -