Macroeconomic Uncertainty: What is It, How Can We Measure It and Why Does it Matter?

10 Pages Posted: 19 Jun 2013

See all articles by Abigail Haddow

Abigail Haddow

Bank of England

Chris Hare

Bank of England

John Hooley

International Monetary Fund (IMF)

Tamarah Shakir

Bank of England - Monetary Analysis

Date Written: June 13, 2013

Abstract

The onset of the financial crisis in 2008 brought an end to the ‘Great Stability’ period, making prospects for UK and global economic growth appear not just weaker, but more uncertain. This elevated uncertainty is likely to have adversely affected spending decisions and contributed to the depth of the recent recession and the weakness of the recovery. While uncertainty is not directly observable, this article constructs an aggregate measure of the economic uncertainty faced by households and companies, based on a number of proxy indicators. It also provides some quantitative analysis of the impact of uncertainty on economic activity, drawing a distinction between shocks to uncertainty that are short-lived and those that are more persistent.

Suggested Citation

Haddow, Abigail and Hare, Chris and Hooley, John and Shakir, Tamarah, Macroeconomic Uncertainty: What is It, How Can We Measure It and Why Does it Matter? (June 13, 2013). Bank of England Quarterly Bulletin 2013 Q2, Available at SSRN: https://ssrn.com/abstract=2281090

Abigail Haddow (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Chris Hare

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

John Hooley

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Tamarah Shakir

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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