The Relation Between Macroeconomic Uncertainty And The Expected Performance Of the Economy

By using data from surveys of expectations, it is shown that macroeconomic uncertainty, measured by the standard deviation of the expected output growth, the expected unemployment rate, and the expected inflation rate, is negatively related to the expected performance of the economy, proxied by the expected growth rate of output. That is, forward-looking agents are more uncertain about the future development of output, unemployment, and inflation when the growth rate of output is expected to fall, and they are less uncertain when this growth rate is expected to increase. The findings indicate that macroeconomic polices would have asymmetric effects on output depending upon how economic agents expect the economy to perform in the near future