NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Economic Uncertainty Before and During the COVID-19 Pandemic

David Altig, Scott R. Baker, Jose Maria Barrero, Nicholas Bloom, Philip Bunn, Scarlet Chen, Steven J. Davis, Julia Leather, Brent H. Meyer, Emil Mihaylov, Paul Mizen, Nicholas B. Parker, Thomas Renault, Pawel Smietanka, Greg Thwaites

NBER Working Paper No. 27418
Issued in June 2020
NBER Program(s):Asset Pricing, Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics, Productivity, Innovation, and Entrepreneurship

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.

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Document Object Identifier (DOI): 10.3386/w27418

 
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