Measuring Macroeconomic Uncertainty: A Cross-Country Analysis

Abstract

This paper constructs internationally consistent measures of macroeconomic un- certainty. Our econometric framework extracts uncertainty from revisions in data obtained from standardized national accounts. Applying our model to quarterly post-WWII real-time data, we estimate macroeconomic uncertainty for 39 coun- tries. The cross-country dimension of our uncertainty data allows us to identify the e ects of uncertainty shocks on economic activity under di erent employment pro- tection legislation. Our empirical ndings suggest that the e ects of uncertainty shocks are stronger and more persistent in countries with low employment pro- tection compared to countries with high employment protection. These empirical ndings are in line with a theoretical model under varying ring cost.