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Working Paper

A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area

This paper examines point and density forecasts of real GDP growth, inflation and unemployment from the European Central Bank’s Survey of Professional Forecasters. We present individual uncertainty measures and introduce individual point- and density-based measures of disagreement. The data indicate substantial heterogeneity and persistence in respondents’ uncertainty and disagreement, with uncertainty associated with prominent respondent effects and disagreement associated with prominent time effects. We also examine the co-movement between uncertainty and disagreement and find an economically insignificant relationship that is robust to changes in the volatility of the forecasting environment. This provides further evidence that disagreement is not a reliable proxy for uncertainty.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.


Suggested Citation

Rich, Robert W., and Joseph Tracy. 2018. “A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area.” Federal Reserve Bank of Cleveland, Working Paper No. 18-13. https://doi.org/10.26509/frbc-wp-201813