The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Motivated by the literature on the capital asset pricing model, we decompose the uncertainty
of a typical forecaster into common and idiosyncratic uncertainty. Using individual survey
data from the Consensus Forecasts over the period of 1989-2014, we develop monthly
measures of macroeconomic uncertainty covering 45 countries and construct a measure of
global uncertainty as the weighted average of country-specific uncertainties. Our measure
captures perceived uncertainty of market participants and derives from two components that
are shown to exhibit strikingly different behavior. Common uncertainty shocks produce the
large and persistent negative response in real economic activity, whereas the contributions of
idiosyncratic uncertainty shocks are negligible.