{
  "title": "A Comprehensive Macroeconomic Uncertainty Measure for the Euro Area and its Implications to COVID-19",
  "publication": "IMF Working Papers, November 3, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2023/11/03/a-comprehensive-macroeconomic-uncertainty-measure-for-the-euro-area-and-its-implications-to-540835",
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  "summary": "This paper develops a new data-driven metric to capture MacroEconomic Uncertainty (MEU) in the euro area. The measure is constructed as the conditional volatility of the unforecastable components of a large set of time series, accounting for the monetary union as well as cross-country heterogeneity.",
  "sections": [
    {
      "heading": "Measure construction and methodology",
      "content": "- Develops a new data-driven metric: MacroEconomic Uncertainty (MEU) for the euro area.\n- MEU is constructed as the conditional volatility of the unforecastable components of a large set of time series.\n- The construction accounts for the monetary union as well as cross-country heterogeneity.\n- Empirical framework uses Bayesian VARs (BVAR-based analysis)."
    },
    {
      "heading": "Key empirical findings",
      "content": "- MEU exhibits the largest spike at the time of the COVID-19 outbreak.\n- MEU is noticeably different from other more financial-oriented and policy-driven uncertainty measures.\n- The measure reveals a significant increase in inflation uncertainty in 2021-2022.\n- BVAR-based analysis results:\n  - An unexpected increase in the MEU has a negative and persistent impact on euro area's industrial production.\n  - The MEU shock accounts for 80 percent of the reduction in industrial production during the first wave of COVID-19, supporting the interpretation of the COVID-19 shock as a macroeconomic uncertainty shock.\n  - Public debt increases in response to this uncertainty shock.\n- International spillovers:\n  - An increase in MEU negatively affects Emerging Europe countries.\n  - MEU contributes the most to the decline in Emerging Europe economic activity during the COVID-19 period."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: COVID-19, Financial crises, Global financial crisis of 2008-2009, Health, Industrial production, Production\n- Keywords: Bayesian VARs, COVID-19, euro area, Europe, Global, Global financial crisis of 2008-2009, IMF working paper No. 2023/229, increase in MEU, Industrial production, macroeconomic uncertainty, macroeconomic uncertainty shock, meu index, uncertainty shock\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/11/03/a-comprehensive-macroeconomic-uncertainty-measure-for-the-euro-area-and-its-implications-to-540835"
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    "Authors: Mariarosaria Comunale, Anh D. M. Nguyen",
    "Published: November 3, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400258176.001",
    "Develops a new data-driven metric: MacroEconomic Uncertainty (MEU) for the euro area.",
    "MEU is constructed as the conditional volatility of the unforecastable components of a large set of time series.",
    "The construction accounts for the monetary union as well as cross-country heterogeneity.",
    "Empirical framework uses Bayesian VARs (BVAR-based analysis).",
    "MEU exhibits the largest spike at the time of the COVID-19 outbreak.",
    "MEU is noticeably different from other more financial-oriented and policy-driven uncertainty measures.",
    "The measure reveals a significant increase in inflation uncertainty in 2021-2022.",
    "BVAR-based analysis results:",
    "International spillovers:",
    "Subject: COVID-19, Financial crises, Global financial crisis of 2008-2009, Health, Industrial production, Production",
    "Keywords: Bayesian VARs, COVID-19, euro area, Europe, Global, Global financial crisis of 2008-2009, IMF working paper No. 2023/229, increase in MEU, Industrial production, macroeconomic uncertainty, macroeconomic uncertainty shock, meu index, uncertainty shock",
    "**Working Paper**"
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