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Review of Economics

Jahrbuch für Wirtschaftswissenschaften

Editor-in-Chief: Berlemann, Michael

Ed. by Haucap, Justus / Thum, Marcel

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The Impact of Macroeconomic Uncertainty on Activity in the Euro Area

Arne Gieseck / Yannis Largent
Published Online: 2016-05-11 | DOI: https://doi.org/10.1515/roe-2015-1008


The impact of macroeconomic uncertainty on activity has been a subject of heightened interest in recent years. Empirical literature typically focuses on the US or on individual euro area countries by using the VAR approach. However, there is limited quantitative evidence about the impact of uncertainty on euro area activity available as yet. In this paper, we derive measures of macroeconomic uncertainty in the euro area from an encompassing dataset, and single out some indicators of uncertainty based on theoretical plausibility and empirical evidence. From this set of indicators, we derive an aggregate measure of macroeconomic uncertainty in the euro area. Using a multivariate structural VAR approach, we then offer some quantitative evidence on the impact of macroeconomic uncertainty on euro area activity during the period 1999–2015. Our main findings show that heightened macroeconomic uncertainty, as measured by the proposed indicators, does have a strongly adverse impact on activity in the euro area, albeit the deepness and duration of the shocks differ somewhat across uncertainty measures.

Keywords: consumption; growth; investment; uncertainty; structural VAR model

JEL: C32; D80; E20; E44; E66


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About the article

Published Online: 2016-05-11

Published in Print: 2016-05-01

Citation Information: Review of Economics, Volume 67, Issue 1, Pages 25–52, ISSN (Online) 2366-035X, ISSN (Print) 0948-5139, DOI: https://doi.org/10.1515/roe-2015-1008.

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