Measuring Uncertainty with Survey Data

Economic uncertainty cannot be directly observed. One operationalisation is to measure uncertainty as dispersion in the ifo Institute's company surveys. Dispersion measures drawing on the business expectations of the companies surveyed in the sectors of manufacturing, construction, wholesaling and retailing and services is presented in ifo Schnelldienst 15/2017. In the article dispersion measures are constructed based on all of the sector-specific expectation questions featured in the ifo Business Surveys. It shows that the measures calculated in this manner correlate with dispersion measures that are only based on companies' business expectations. This result highlights that the dispersion of business expectations can be used as a basis for sectoral dispersion measures, as well as cross-sector measures. The ifo Institute began publishing such measures in August 2017 as part of the monthly results of the ifo Business Surveys for Germany. They serve as constructs both for estimating uncertainty in selected economic sectors - manufacturing, construction, wholesaling and retailing and services - and uncertainty in the entire private sector. The fact that the dispersion of business expectations with individual sectors correlates strongly with certain individual questions or with the average results offers an incentive to conduct further research into the sector-specific idiosyncrasies of uncertainty.