subjective interest rate uncertainty and the macroeconomy a cross country analysis abstract we ask whether uncertainty about interest rates is important for economic activity the effects of interest rate uncertainty on the economy are examined through the lens of a small var where the assumption that uncertainty can affect real activity contemporaneously but not vice versa is indeed in line with the data our measure of uncertainty stems from professional forecasts of short and long term interest rates and accounts for both disagreement among forecasters and the perceived variability of future aggregate shocks studying a panel of countries we find that subjective interest rate uncertainty has large negative and persistent effects on the economy

macroeconomic uncertainty through the lens of professional forecasters abstractwe analyze the evolution of macroeconomic uncertainty in the united states based on the forecast errors of consensus survey forecasts of various economic indicators comprehensive information contained in the survey forecasts enables us to capture a real time measure of uncertainty surrounding subjective forecasts in a simple framework we jointly model and estimate macroeconomic common and indicator specific uncertainties of four indicators using a factor stochastic volatility model our macroeconomic uncertainty estimates have three major spikes has three major spikes aligned with the 1973 1975 1980 and 2007 2009 recessions while other recessions were characterized by increases in indicator specific uncertainties we also show that the selection of data vintages affects the estimates and relative size of jumps in estimated uncertainty series finally our macroeconomic uncertainty has a persistent negative impact on real economic activity rather than producing wait and see dynamics

uncertainty matters evidence from close elections abstract this paper uses a data rich environment to produce direct econometric estimates of macroeconomic and financial uncertainty for 11 advanced nations these indices exhibit significant independent variation from popular proxies and provide a refinement of the influential work of jurado et al 2015 that results in improved real time performance we use this new data in combination with narrative evidence to jointly identify macro uncertainty and financial shocks macro uncertainty shocks are identified with close elections and financial shocks with financial stress during financial crises we find that macro uncertainty shocks matter for the majority of countries and that the real effects of macro uncertainty shocks are generally larger conditioning on close elections these results are robust to controlling for news shocks and global uncertainty as well as a variety of shocks considered to be important drivers of the business cycle

the evolving impact of global region specific and country specific uncertainty we develop a dynamic factor model with time varying parameters and stochastic volatility estimate it using a large panel of macroeconomic and financial data for 22 countries and decompose the vari

measuring global and country specific uncertainty abstract 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

the diverging patterns of profitability investment and growth of china and india during 1980 2003 summary this paper documents the diverging patterns of capital accumulation profit rates investment rates capital productivity and technological progress of china and india between 1980 and 2003 the two asian economies have followed very different growth patterns and today they face different challenges india s is how to accelerate growth while china s policy makers debate between the need to maintain a high growth rate to generate employment and the imperative to reduce it to cool the economy india must address impediments to investment china must deal with the question of whether investment can continue being the main source of growth

measuring forecast uncertainty by disagreement the missing link using a standard decomposition of forecast errors into common and idiosyncratic shocks we show that aggregate forecast uncertainty can be expressed as the disagreement among the forecasters plus the perceived variability of future aggregate shocks thus the reliability of disagreement as a proxy for uncertainty will be determined by the stability of the forecasting environment and the length of the forecast horizon using density forecasts from the survey of professional forecasters we find direct evidence in support of our hypothesis our results support the use of garch type models rather than the ex post squared errors in consensus forecasts to estimate the ex ante variability of aggregate shocks as a component of aggregate uncertainty copyright 2010 john wiley sons ltd

why has china succeeded and why it will continue to do so the key factor underlying china s fast development during the last 50 years is its ability to master and accumulate new and more complex capabilities reflected in the increase in diversification and sophistication of its export basket this accumulation was policy induced and not the result of the market and began before 1979 during the last 50 years china has acquired revealed comparative advantage in the export of both labour intensive products following its factor abundance and sophisticated products although the latter does not mean that there was leapfrogging china is exceptionally well positioned especially taking into account its income per capita to continue learning and gaining revealed comparative advantage in the export of more sophisticated products given adequate policies carefully thought out and implemented reforms and skilful management of constraints and risks china has the potential to continue thriving this does not mean however that high growth will continue indefinitely

the impacts of structural oil shocks on macroeconomic uncertainty evidence from a large panel of 45 countries abstract using local projection methods this paper employs monthly panel data from 1989 to 2017 to examine both linear and nonlinear impulse responses of macroeconomic uncertainty to structural shocks to global oil production aggregate demand oil market specific demand and speculative demand in a large group of 45 economies we find that both oil supply and demand shocks are important drivers of uncertainty there is strong evidence that the impacts of oil price shocks on macroeconomic uncertainty are regime dependent and contingent on the states of investor sentiments and perceived volatility in financial markets the responses of economic uncertainty to oil shocks especially demand side shocks appear to experience a dramatic change in the post global financial crisis period

making room for china in the world economy as it comes out of the crisis the world econ omy faces two apparently conflicting demands on the one hand achieving global macroeco nomic stability and preventing a protectionist backlash will require that we avoid large current account imbalances of the type that the world economy experienced in the run up to the cri sis on the other hand returning to rapid growth in the developing nations will require that they resume their conquest of global market share in tradable goods the challenge of meeting both demands is epitomized by the contentious us china bilat eral relationship american and european policy makers blame china for an undervalued renminbi which they argue is the root cause of china s huge trade surplus chinese leaders resist the pressure fearing that appreciation will undercut the competitiveness of chinese goods in world markets hurt exports and damage growth the western answer to this concern is that china needs to replace foreign demand with domestic demand as the engine of growth but if growth depends primarily on the sup ply of modern manufactured products and other tradables as opposed to services and non trad ables as i will argue here the chinese position has more force than critics give it credit the conventional fix for china s current account surplus consisting of a combination of expendi ture expansion and currency appreciation will shift the structure of the economy away from tradables and towards non tradables this may be good for macroeconomic balance in china and elsewhere but it will almost certainly have adverse effects on china s growth perhaps large enough even to endanger the country s social and political stability

the international effects of global financial uncertainty shocks abstract in this paper we study the impact of sudden rises in global financial uncertainty on small open economies to this end we extract a global factor from the realised volatilities of about 1000 risky asset returns from around the world we then analyse how shocks to this factor affect economic activity in 44 advanced and emerging small open economies by estimating local projections in a panel regression framework we find that shocks increasing global financial uncertainty have adverse consequences on output trade and unemployment while their impact on nominal variables is more heterogeneous across countries furthermore the effects are more severe in countries with a higher degree of trade or financial openness higher levels of vulnerabilities weaker institutions or during economic downturns

the impact of employment tax cuts on unemployment and wages the role of unemployment benefits and tax structure abstract i model and simulate the effects of employment tax cuts on unemployment and wages in four equilibrium models competitive union bargaining search and efficiency wages i find that if the ratio of unemployment compensation to wages is fixed the effect of the tax cut is mainly on wages but if income out of work is fixed in real terms there are substantial employment effects when wages are determined by bargaining revenueneutral reforms that make the tax more progressive also reduce unemployment thus policy towards unemployment compensation and tax structure are key influences on the effect of taxes on unemployment

optimal labour taxation and search abstract this paper explores the optimal role of the tax system in alleviating labour market imperfections and raising revenue for this purpose the standard search model of the labour market is extended by introducing scarce entrepreneurial talent and arbitrage between the supply and demand sides of the labour market we study how these extensions affect the following two major implications of the standard model 1 only the ad valorem component of the wage tax should be employed to raise revenue 2 the optimal tax system should not distort labour market tightness

sources of growth abstract distributive shares are commonly identified with sector or marginal factor productivity in value terms and after deflating these values by prices with physical productivity as well in this paper it is argued that this approach yields incorrect or misleading views on the true sources of or contributions to growth even more serious the identification may lead to mistaken policies designed to foster or accelerate growth in reality distributive shares in the national accounts have little to do with physical productivity or the sources of growth

economic development as self discovery in the presence of uncertainty about what a country can be good at producing there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated we develop a general equilibrium framework for a small open economy to clarify the analytical and normative issues we highlight two failures of the laissez faire outcome there is too little investment and entrepreneurship ex ante and too much production diversification ex post optimal policy consists of counteracting these distortions to encourage investments in the modern sector ex ante but to rationalize production ex post we provide some informal evidence on the building blocks of our model

disequilibrium exchange rates as industrialization policy abstract this paper deals with a long standing puzzle why are developing countries so reluctant to change their exchange rates when their currencies have become blatantly overvalued the argument developed here is the following under circumstances that are fairly common to real economies a policy which deliberately maintains the exchange rate at a disequilibrium level can be welfare increasing by promoting structural change this can come via the presence of a systematic link between the real exchange rate and the manufacturing sector s terms of trade vis a vis agriculture the paper considers a model in which there exists a relationship between these two due to technological factors using a two period two sector general equilibrium model it demonstrates that such a link provides authorities with a tool which can be manipulated to bring about industrial growth and increase welfare in the presence of unrealized learning by doing effects

macroeconomic uncertainty indices based on nowcast and forecast error distributions abstract we propose new indices to measure macroeconomic uncertainty the indices measure how unexpected a realization of a representative macroeconomic variable is relative to the unconditional fo

forecast uncertainty ex ante and ex post u s inflation and output growth survey respondents who make point predictions and histogram forecasts of macro variables reveal both how uncertain they believe the future to be ex ante as well as their ex post performance macroeconomic forecasters tend to be overconfident at horizons of a year or more but overestimate i e are underconfident regarding the uncertainty surrounding their predictions at short horizons ex ante uncertainty remains at a high level compared to the ex post measure as the forecast horizon shortens there is little evidence of a link between individuals ex post forecast accuracy and their ex ante subjective assessments

how does financial development alter the impact of uncertainty abstract how does the impact of uncertainty on output vary with financial development levels we investigate this question empirically using a quarterly panel data set of 50 countries between 1971 and 2009 and an instrumental variables model the results support the conjecture that financial development mitigates the negative impact of uncertainty on output at the lower end of the distribution of the financial development levels one standard deviation increase in uncertainty decreases output by more than two standard deviations at the higher end of financial development the impact on output is statistically insignificant these results suggest that strengthening the financial system and increasing liquidity and credit availability improce the robustness of growth performance during periods of uncertainty

credit intermediation and the transmission of macro financial uncertainty international evidence abstract this paper introduces a novel measure of global macro financial uncertainty and examines the state dependent transmission of uncertainty to economic activity we show that global uncertainty shocks have adverse and nonlinear macroeconomic effects with the nonlinearity being driven by different levels of country specific banking sector distress both macroeconomic and financial market uncertainty are associated with lower economic activity with the latter exerting stronger effects the state dependency of the effect is prevalent in both cases our findings have important policy implications highlighting both the state of the banking sector as well as the origin of uncertainty as crucial factors in the transmission of uncertainty

the implications of central bank transparency for uncertainty and disagreement abstract using survey data from 25 economies we provide evidence that greater transparency surrounding monetary policy reduces uncertainty of interest rates and inflation primarily by reducing uncertainty that is common to agents rather than disagreement between agents this suggests that studies that focus on disagreement as a proxy for uncertainty understate the benefits of monetary policy transparency the adoption of inflation targets and forward guidance are both associated with lower uncertainty although inflation targets have a stronger impact on reducing uncertainty than forward guidance moreover there are diminishing benefits from ever higher levels of transparency taken as a whole our results support the contention that clarity of communication is as important as the magnitude of transparency