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

Authors Ravenna, Federico (Danmarks Nationalbank); Züllig, Gabriel (Danmarks Nationalbank); Pellegrino, Giovanni (University of Aarhus)
Subject Current economic and monetary trends; Economic activity and employment; Models
Type Working paper
Year 2020
Published 26 October 2020
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.