TY - JOUR AU - Bachmann,Ruediger AU - Elstner,Steffen AU - Sims,Eric R. TI - Uncertainty and Economic Activity: Evidence from Business Survey Data JF - National Bureau of Economic Research Working Paper Series VL - No. 16143 PY - 2010 Y2 - June 2010 DO - 10.3386/w16143 UR - http://www.nber.org/papers/w16143 L1 - http://www.nber.org/papers/w16143.pdf N1 - Author contact info: Ruediger Bachmann 3026 Jenkins Nanovic Hall Department of Economics University of Notre Dame Notre Dame, IN 46556 E-Mail: rbachman@nd.edu Steffen Elstner German Council of Economic Experts Statistisches Bundesamt 65180 Wiesbaden Germany E-Mail: steffen.elstner@destatis.de Eric R. Sims Department of Economics University of Notre Dame 723 Flanner Hall South Bend, IN 46556 Tel: 574/631-6309 Fax: 574/631-4783 E-Mail: esims1@nd.edu M2 - featured in NBER digest on 2010-11-01 AB - 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. ER -