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What are the economic signals from uncertainty measures?

Author

Listed:
  • Andersson, Malin
  • Bobasu, Alina
  • De Santis, Roberto A.

Abstract

High levels of economic uncertainty may push households and firms to postpone spending and investment decisions, which could dampen economic activity. Given that uncertainty is not directly observable, this box assesses recent signals from a number of uncertainty measures that are derived from statistical methods, surveys, financial data and textual analysis. There is currently a divergence between the relatively low uncertainty indicated by measures associated with the short-term economic situation and the still high – and rising – uncertainty reflected in measures related to longer-term policy issues. Analysis based on a simple empirical framework suggests that increasing uncertainty, especially about economic policies, dampens real GDP, consumption and particularly business investment. JEL Classification: D11, D84, E31

Suggested Citation

  • Andersson, Malin & Bobasu, Alina & De Santis, Roberto A., 2025. "What are the economic signals from uncertainty measures?," Economic Bulletin Boxes, European Central Bank, vol. 8.
    • Handle: RePEc:ecb:ecbbox:2025:0008:3
    Note: 427284
    as

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    More about this item

    Keywords

    economic activity; risk; uncertainty;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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