NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Measuring Uncertainty

Kyle Jurado, Sydney C. Ludvigson, Serena Ng

NBER Working Paper No. 19456
Issued in September 2013
NBER Program(s):   AP   EFG

This paper exploits a data rich environment to provide direct econometric estimates of time-varying macroeconomic uncertainty, defined as the common variation in the unforecastable component of a large number of economic indicators. Our estimates display significant independent variations from popular uncertainty proxies, suggesting that much of the variation in the proxies is not driven by uncertainty. Quantitatively important uncertainty episodes appear far more infrequently than indicated by popular uncertainty proxies, but when they do occur, they are larger, more persistent, and are more correlated with real activity. Our estimates provide a benchmark to evaluate theories for which uncertainty shocks play a role in business cycles.

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An online appendix is available for this publication.

This paper was revised on March 13, 2014

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19456

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