COVID-Induced Economic Uncertainty

Assessing the economic impact of the COVID-19 pandemic is essential for policymakers, but challenging because the crisis has unfolded with extreme speed. We identify three indicators -stock market volatility, newspaper-based economic uncertainty, and subjective uncertainty in business expectation surveys -that provide real-time forward-looking uncertainty measures. We use these indicators to document and quantify the enormous increase in economic uncertainty in the past several weeks. We also illustrate how these forward-looking measures can be used to assess the macroeconomic impact of the COVID-19 crisis. Specifically, we feed COVID-induced first-moment and uncertainty shocks into an estimated model of…

• NS
  National Science Foundation
• AP
  Alfred P. Sloan Foundation
• UO
  University of Chicago
• BS
  Booth School of Business, University of Chicago