Macroeconomic Uncertainty Indices for the Euro Area and Individual Member Countries

Abstract

This paper introduces the Rossi and Sekhposyan (2015) uncertainty index for the Euro Area and its member countries. The index captures how unexpected a forecast error associated with a realization of a macroeconomic variable is relative to the unconditional forecast error distribution. Furthermore, it can differentiate between upside and downside uncertainty, which could be relevant for addressing a variety of economic questions. The index is particularly useful since it can be constructed for any economy for which point forecasts and realizations are available. We show the usefulness of the index in studying the heterogeneity of uncertainty across Euro Area countries as well as the spillover effects via a network approach. .