The impact of uncertainty on activity in the euro area

Fluctuations in uncertainty can play an important role in shaping the economic conjuncture and outlook. This article discusses the various methods proposed in the literature to measure uncertainty and shows how these measures have evolved in the euro area. It describes the transmission channels of fluctuations in uncertainty to the economy and provides some model-based evidence for the impact of uncertainty on euro area activity. The results suggest that uncertainty in the euro area rose substantially during the Great Recession and during the sovereign debt crisis, and
that high uncertainty could significantly dampen activity in the euro area, and notably investment.

• Primary Source

ECB: Publications: Economic Bulletin https://www.ecb.europa.eu/pub/economic-bulletin/html/index.en.html

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