Working Paper: The Impact of Pessimistic Expectations on the Effects of COVID-19-Induced Uncertainty in the Euro Area
Working Paper - October 2020 - No. 162
A statistical model for euro area macroeconomic aggregates shows that an increase in uncertainty and disagreement about the economic outlook impacts the economy three times as much if the outlook is pessimistic. This result implies that the uncertainty generated by COVID-19 can lead to a 15.1% fall in industrial production.