Abstract

https://ssrn.com/abstract=1630148
 
 

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Uncertainty and Economic Activity: Evidence from Business Survey Data


Ruediger Bachmann


University of Michigan at Ann Arbor

Steffen Elstner


German Council of Economic Experts

Eric R. Sims


University of Michigan at Ann Arbor; University of Notre Dame - Department of Economics

June 2010

NBER Working Paper No. w16143

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.

Number of Pages in PDF File: 49


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Date posted: June 29, 2010  

Suggested Citation

Bachmann, Ruediger and Elstner, Steffen and Sims, Eric R., Uncertainty and Economic Activity: Evidence from Business Survey Data (June 2010). NBER Working Paper No. w16143. Available at SSRN: https://ssrn.com/abstract=1630148

Contact Information

Ruediger Bachmann (Contact Author)
University of Michigan at Ann Arbor ( email )
500 S. State Street
Ann Arbor, MI 48109
United States
Steffen Elstner
German Council of Economic Experts ( email )
Federal Statistical Office
Gustav-Stresemann-Ring 11
Wiesbaden, Hessen 65180
Germany
Eric R. Sims
University of Michigan at Ann Arbor ( email )
500 S. State Street
Ann Arbor, MI 48109
United States
University of Notre Dame - Department of Economics ( email )
Notre Dame, IN 46556
United States
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