Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212408 
Authors: 
Year of Publication: 
2017
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 37/2017
Publisher: 
Bank of Finland, Helsinki
Abstract: 
This study provides estimates of the real effects of macro-uncertainty de- composed into fundamental and overconfidence bias components. Crucially, overconfidence biases lower ex-ante measures of uncertainty, while fundamen- tal uncertainty raises both ex-ante and ex-post measures. This distinction is useful since the estimates on the real effects of the overconfidence component of uncertainty mitigate endogeneity concerns. I first document evidence for overconfidence biases from survey density forecasts in the US survey of pro- fessional forecasters. Then, using a sign and zero restrictions identification scheme in a vector autoregression (VAR), I find that increases in fundamental uncertainty and declines in overconfidence tend to lower real activity.
JEL: 
C32
D84
E37
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-204-4
Document Type: 
Working Paper

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