Measuring Macroeconomic Uncertainty to Brasil

Abstract

The paper proposes estimating a macroeconomic measure of uncertainty to Brazil. The index was constructed based on the methodology of Jurado et al. (2015) used to build the same index for the US economy. We show that an increase in the uncertainty level leads to economic recessions. Moreover, the recent macroeconomic policy adopted by the Brazilian government in 2010-2011 was followed up by substantial increase in the uncertainty level of the Brazilian economy. Our results suggest that the proposed uncertainty measure can be used to assess macroeconomic policies as well as predict economic recessions.

Keywords

• Macroeconomic uncertainty
• Volatility
• Real Business Cycles.