Pandemic-Era Uncertainty on Main Street and Wall Street

Brent Meyer, Emil Mihaylov, Steven Davis, Nicholas Parker, David Altig (), Jose Maria Barrero and Nicholas Bloom
Additional contact information
Emil Mihaylov: Federal Reserve Bank of Atlanta
Nicholas Parker: Federal Reserve Bank of Atlanta
David Altig: Federal Reserve Bank of Atlanta

No 2020-189, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: We draw on the monthly Survey of Business Uncertainty (SBU) to make three observations about pandemic-era uncertainty in the U.S. economy. First, equity market traders and executives of nonfinancial firms share similar assessments about uncertainty at one-year look- ahead horizons. That is, the one-year VIX has moved similarly to our survey-based measure of (average) firm-level subjective uncertainty at one-year forecast horizons. Second, looking within the distribution of beliefs in the SBU reveals that firm-level expectations shifted towards upside risk in the latter part of 2020. In this sense, decision makers in nonfinancial businesses share some of the optimism that seems manifest in equity markets. Third, and despite the positive shift in tail risks, overall uncertainty continues to substantially dampen capital spending plans, pointing to a source of weak growth in potential GDP.

Keywords: Business expectations; uncertainty; subjective forecast distributions; surveys (search for similar items in EconPapers)
JEL-codes: L2 M2 O32 O33 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2020
New Economics Papers: this item is included in nep-bec and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Pandemic-Era Uncertainty on Main Street and Wall Street (2021)
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