Discussion paper

DP12083 Uncertainty and the Great Recession

Has heightened uncertainty been a major contributor to the Great Recession and the slow recovery in the U.S.? To answer this question, we identify exogenous changes in six uncertainty proxies and quantify their contributions to GDP growth and the unemployment rate. The answer is no. In total we find that increased macroeconomic and financial uncertainty can explain up to 10 percent of the drop in GDP at the height of the recession and up to 0.7 percentage points of the increased unemployment rates in 2009 through 2011. Our calculations further suggest that only a minor part of the rise in popular uncertainty measures during the Great Recession was driven by exogenous uncertainty shocks.


Born, B and S Elstner (eds) (2017), “DP12083 Uncertainty and the Great Recession”, CEPR Press Discussion Paper No. 12083. https://cepr.org/publications/dp12083