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The shape of Eurozone’s uncertainty

  • 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.

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Metadaten
Verfasserangaben:Ralf Fendel, Nicola Mai, Oliver Mohr
URN:urn:nbn:de:hbz:992-opus4-7415
Untertitel (Englisch):its impact and predictive value on GDP
Schriftenreihe (Bandnummer):WHU – Working Paper Series in Economics (WP 19/01)
Verlag:WHU - Otto Beisheim School of Management
Verlagsort:Vallendar
Dokumentart:Arbeitspapier
Sprache:Englisch
Datum der Veröffentlichung (online):10.05.2019
Datum der Erstveröffentlichung:10.05.2019
Veröffentlichende Institution:WHU - Otto Beisheim School of Management
Datum der Freischaltung:10.05.2019
Freies Schlagwort / Tag:Bruttoinlandsprodukt; Europäische Union; Eurozone; Geschäftszyklus; Prognose; Unsicherheit; Vektorautoregressives Modell
Business cycle; European Union; Eurozone; Forecasting; Gross domestic product; Uncertainty; Vector autoregression
Seitenzahl:33
Institute:WHU Economics Group / Chair of Monetary Economics
JEL-Klassifikation:D Microeconomics / D8 Information, Knowledge, and Uncertainty
E Macroeconomics and Monetary Economics / E2 Macroeconomics: Consumption, Saving, Production, Employment, and Investment / E23 Production
E Macroeconomics and Monetary Economics / E2 Macroeconomics: Consumption, Saving, Production, Employment, and Investment / E27 Forecasting and Simulation
E Macroeconomics and Monetary Economics / E3 Prices, Business Fluctuations, and Cycles / E32 Business Fluctuations; Cycles
E Macroeconomics and Monetary Economics / E3 Prices, Business Fluctuations, and Cycles / E37 Forecasting and Simulation
Lizenz (Deutsch):Copyright for this publication