Economic uncertainty before and during the COVID-19 pandemic

Dave Altig, Scott Baker, Jose Maria Barrero, Nicholas Bloom, Phil Bunn, Scarlet Chen, Steven Davis, Julia Leather, Brent Meyer, Emil Mihaylov, Paul Mizen, Nick Parker, Thomas Renault, Pawel Smietanka and Grey Thwaites

No 2020/07, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: We consider several economic uncertainty indicators for the US and UK before and during the COVID-19 pandemic: implied stock market volatility, newspaper-based policy uncertainty, twitter chatter about economic uncertainty, subjective uncertainty about business growth, forecaster disagreement about future GDP growth, and a model-based measure of macro uncertainty. Four results emerge. First, all indicators show huge uncertainty jumps in reaction to the pandemic and its economic fallout. Indeed, most indicators reach their highest values on record. Second, peak amplitudes differ greatly – from a 35% rise for the model-based measure of US economic uncertainty (relative to January 2020) to a 20-fold rise in forecaster disagreement about UK growth. Third, time paths also differ: Implied volatility rose rapidly from late February, peaked in mid-March, and fell back by late March as stock prices began to recover. In contrast, broader measures of uncertainty peaked later and then plateaued, as job losses mounted, highlighting differences between Wall Street and Main Street uncertainty measures. Fourth, in Cholesky-identified VAR models fit to monthly U.S. data, a COVID-size uncertainty shock foreshadows peak drops in industrial production of 12-19%.

Keywords: forward-looking uncertainty measures; volatility; COVID-19; coronavirus (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-rmg
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https://www.nottingham.ac.uk/cfcm/documents/papers/2020/cfcm-2020-07.pdf (application/pdf)

Related works:
Journal Article: Economic uncertainty before and during the COVID-19 pandemic (2020)
Working Paper: Economic Uncertainty Before and During the COVID-19 Pandemic (2020)
Working Paper: Economic uncertainty before and during the Covid-19 pandemic (2020)
Working Paper: Economic Uncertainty before and during the COVID-19 Pandemic (2020)
Working Paper: Economic uncertainty before and during the COVID-19 pandemic (2020)
Working Paper: Economic uncertainty before and during the COVID-19 pandemic (2020)
Working Paper: Economic Uncertainty Before and During the COVID-19 Pandemic (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:2020/07

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