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Uncertainty and Economic Activity: Evidence from Business Survey Data

Ruediger Bachmann (), Steffen Elstner () and Eric Sims ()

No 16143, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: E30 E32 E37 (search for similar items in EconPapers)
Date: 2010-06
Note: EFG ME
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Published as R?diger Bachmann & Steffen Elstner & Eric R. Sims, 2013. "Uncertainty and Economic Activity: Evidence from Business Survey Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 217-49, April.

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Journal Article: Uncertainty and Economic Activity: Evidence from Business Survey Data (2013) Downloads
Working Paper: Uncertainty and Economic Activity: Evidence from Business Survey Data (2012) Downloads
Working Paper: Uncertainty and Economic Activity: Evidence from Business Survey Data (2010) Downloads
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