Institutional Affiliation: Instituto Tecnologico Autonomo de Mexico - Business School
|Economic Uncertainty Before and During the COVID-19 Pandemic|
with David Altig, Scott R. Baker, Nicholas Bloom, Philip Bunn, Scarlet Chen, Steven J. Davis, Julia Leather, Brent H. Meyer, Emil Mihaylov, Paul Mizen, Nicholas B. Parker, Thomas Renault, Pawel Smietanka, Greg Thwaites: w27418
We consider several economic uncertainty indicators for the US and UK before and during the COVID-19 pandemic: implied stock market volatility, newspaper-based economic policy uncertainty, twitter chatter about economic uncertainty, subjective uncertainty about future business growth, and disagreement among professional forecasters about future GDP growth. Three results emerge. First, all indicators show huge uncertainty jumps in reaction to the pandemic and its economic fallout. Indeed, most indicators reach their highest values on record. Second, peak amplitudes differ greatly – from a rise of around 100% (relative to January 2020) in two-year implied volatility on the S&P 500 and subjective uncertainty around year-ahead sales for UK firms to a 20-fold rise in forecaster disagreement abo...
|COVID-19 Is Also a Reallocation Shock|
with Nicholas Bloom, Steven J. Davis: w27137
Drawing on firm-level expectations at a one-year forecast horizon in the Survey of Business Uncertainty (SBU), we construct novel, forward-looking reallocation measures for jobs and sales. These measures rise sharply after February 2020, reaching rates in April that are 2.4 (3.9) times the pre-COVID average for jobs (sales). We also draw on special questions in the April SBU to quantify the near-term impact of the COVID-19 shock on business staffing. We find 3 new hires for every 10 layoffs caused by the shock and estimate that 42 percent of recent layoffs will result in permanent job loss. Our survey evidence aligns well with anecdotal evidence of large pandemic-induced demand increases at some firms, with contemporaneous evidence on gross business formation, and with a sharp pandemic-ind...
|Surveying Business Uncertainty|
with David Altig, Nicholas Bloom, Steven J. Davis, Brent H. Meyer, Nicholas Parker: w25956
We elicit subjective probability distributions from business executives about their own-firm outcomes at a one-year look-ahead horizon. In terms of question design, our key innovation is to let survey respondents freely select support points and probabilities in five-point distributions over future sales growth, employment, and investment. In terms of data collection, we develop and field a new monthly panel Survey of Business Uncertainty. The SBU began in 2014 and now covers about 1,750 firms drawn from all 50 states, every major nonfarm industry, and a range of firm sizes. We find three key results. First, firm-level growth expectations are highly predictive of realized growth rates. Second, subjective uncertainty is highly predictive of forecast errors and the magnitude of future foreca...
|Short and Long Run Uncertainty|
with Nicholas Bloom, Ian Wright: w23676
Uncertainty appears to have both a short-run and a long-run component, which we measure using firm and macro implied volatility data from options of 30 days to 10 years duration. We ask what may be driving uncertainty over these different time horizons, finding that oil price volatility is particularly important for short-run uncertainty, policy uncertainty is particularly important for long-run uncertainty, while currency volatility and CEO turnover appear to equally impact short- and long-run uncertainty. Examining a panel of over 4,000 firms from 1996 to 2013 we find that R&D is relatively more sensitive to long-run uncertainty than investment, and in turn investment is relatively more sensitive to long-run uncertainty than hiring. In a simulation model we investigate the channels under...