The Measurement and Behavior of Uncertainty: Replication with Evidence from the US Survey of Professional Forecasters

This research concerns the measurement and behavior of uncertainty, based on the point and probability forecasts of the Survey of Professional Forecasters from both the euro area and the United States. Several proxies are proposed to analyze the relationship with a variance- and IQR- based measure of uncertainty. Measures of disagreement and forecast accuracy do not show a meaningful linkage with uncertainty for both surveys. The aggregate point predictions however do show a meaningful linkage with uncertainty for GDP growth (euro area) and inflation (United States). This indicates that expectations of a lower GDP growth in the euro area are accompanied with higher GDP growth uncertainty. In the United States, expectations of a lower inflation rate are followed by higher inflation uncertainty. The results are not influenced by the changing composition of the respondents in the euro area. However, the varying composition of the respondents in the the United States does reduce the explanatory power of the estimated relationships.