Economic Uncertainty Before and During the COVID-19 Pandemic

25 Pages Posted: 1 Jul 2020

See all articles by David Altig

David Altig

Federal Reserve Banks - Federal Reserve Bank of Atlanta; Federal Reserve Bank of Cleveland; University of Chicago - Booth School of Business

Scott Baker

Washington University in St. Louis - School of Law

Jose Maria Barrero

ITAM - Business School

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Philip Bunn

Bank of England

Scarlet Chen

Stanford University

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER); Hoover Institution

Brent Meyer

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Emil Mihaylov

Federal Reserve Banks - Federal Reserve Bank of Dallas

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Nicholas Parker

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Thomas Renault

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)

Pawel Smietanka

Bank of England

Gregory Thwaites

Bank of England - Monetary Analysis

Multiple version iconThere are 3 versions of this paper

Date Written: June 29, 2020

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 economic policy uncertainty, twitter chatter about economic uncertainty, subjective uncertainty about future business growth, and disagreement among professional forecasters about future GDP growth. Three 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 rise of around 100% (relative to January 2020) in two-year implied volatility on the S&P 500 and subjective uncertainty around year-ahead sales for UK firms 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 the difference in uncertainty measures between Wall Street and Main Street.

Keywords: forward-looking uncertainty measures, volatility, COVID-19, coronavirus

JEL Classification: D80, E22, E66, G18, L50

Suggested Citation

Altig, David and Baker, Scott A. and Barrero, Jose Maria and Bloom, Nicholas and Bunn, Philip and Chen, Scarlet and Davis, Steven J. and Meyer, Brent H. and Mihaylov, Emil and Mizen, Paul and Parker, Nicholas and Renault, Thomas and Smietanka, Pawel and Thwaites, Gregory, Economic Uncertainty Before and During the COVID-19 Pandemic (June 29, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-88, Available at SSRN: https://ssrn.com/abstract=3638649

David Altig

Federal Reserve Banks - Federal Reserve Bank of Atlanta

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Federal Reserve Bank of Cleveland ( email )

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University of Chicago - Booth School of Business

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Scott A. Baker

Washington University in St. Louis - School of Law ( email )

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Jose Maria Barrero

ITAM - Business School ( email )

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Nicholas Bloom

Stanford University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Philip Bunn

Bank of England ( email )

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Scarlet Chen

Stanford University ( email )

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Steven J. Davis (Contact Author)

University of Chicago ( email )

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National Bureau of Economic Research (NBER)

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Brent H. Meyer

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

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Emil Mihaylov

Federal Reserve Banks - Federal Reserve Bank of Dallas

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Paul Mizen

University of Nottingham ( email )

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United Kingdom
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Bank of England

Threadneedle Street
London, EC2R 8AH
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Centre for Economic Policy Research (CEPR)

London
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Nicholas Parker

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Thomas Renault

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )

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106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

Pawel Smietanka

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Gregory Thwaites

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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