The relationship between aggregate uncertainty and firm-level uncertainty

Easaw, Joshy ORCID: https://orcid.org/0000-0003-3476-4300 and Grimme, Christian 2024. The relationship between aggregate uncertainty and firm-level uncertainty. Oxford Economic Papers , gpae004. 10.1093/oep/gpae004 Item availability restricted.

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Abstract

Many firm-level studies use aggregate uncertainty to proxy for firm-level uncertainty. Providing support for this strategy, we analyse the extent to which firm-level uncertainty is affected by aggregate uncertainty. Firm-level uncertainty is constructed from a large and monthly panel dataset of manufacturing firms. We find that aggregate uncertainty is associated positively and robustly with firm-level uncertainty. This correlation holds across different types of domestic and international measures of aggregate uncertainty. However, the extent of the correlations is heterogeneous and depends on certain firm characteristics and the state of the business cycle. For example, the widely used economic policy uncertainty index matters to all firms’ uncertainty only in recessionary periods, while it is relevant over the entire business cycle only to large firms’ uncertainty.

Item Type:	Article
Date Type:	Published Online
Status:	In Press
Schools:	Business (Including Economics)
Publisher:	Oxford University Press
ISSN:	0030-7653
Date of First Compliant Deposit:	25 March 2024
Date of Acceptance:	2 February 2024
Last Modified:	25 Mar 2024 12:03
URI:	https://orca.cardiff.ac.uk/id/eprint/167263

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