Measuring Global and Country-Specific Uncertainty

Author/Editor:

Ezgi O. Ozturk ; Xuguang Simon Sheng

Publication Date:

October 30, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Motivated by the literature on the capital asset pricing model, we decompose the uncertainty of a typical forecaster into common and idiosyncratic uncertainty. Using individual survey data from the Consensus Forecasts over the period of 1989-2014, we develop monthly measures of macroeconomic uncertainty covering 45 countries and construct a measure of global uncertainty as the weighted average of country-specific uncertainties. Our measure captures perceived uncertainty of market participants and derives from two components that are shown to exhibit strikingly different behavior. Common uncertainty shocks produce the large and persistent negative response in real economic activity, whereas the contributions of idiosyncratic uncertainty shocks are negligible.

Series:

Working Paper No. 17/219

Subject:

English

Publication Date:

October 30, 2017

ISBN/ISSN:

9781484316597/1018-5941

Stock No:

WPIEA2017219

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

41

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