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Abstract

This dissertation consists of three essays in macroeconomics. It focuses on empirical questions related to the role of uncertainty for the economy, monitoring current and future economic conditions, and the intersection of these two fields. The first essay, Uncertainty as a Predictor of Economic Activity, explores whether and to what extent empirical measures of uncertainty are informative about risks to future economic activity. It finds that macroeconomic uncertainty predicts downside risks to growth in the United States. Alternative empirical measures of uncertainty, such as economic policy uncertainty and geopolitical risk, do not predict risks to the economic outlook. The results hold for a larger sample of countries and underline the importance of differentiating between measures of uncertainty when predicting risks to growth. The second essay, Fear Thy Neighbor: Spillovers from Economic Policy Uncertainty, tests for spillovers from economic policy uncertainty on other countries’ economic activity. The results suggest that economic policy uncertainty reduces growth in real output, private consumption, and private investment both in the domestic economy and abroad. The spillovers to other economies are sizable. The last essay, Factor Models for Nonstationary Series: Estimates of Monthly US GDP, develops a novel dynamic factor model for nonstationary data. The model is applied to estimates of monthly GDP and nowcasts of quarterly GDP over the 2007-2009 crisis in the United States. These applications show that the model tracks the evolution of GDP well.

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