How Well Does Uncertainty Forecast Economic Activity?

We evaluate the forecasting ability of several popular measures of uncertainty. We construct new real-time versions of both macro-economic and financial uncertainty, and analyze them together with their ex post counterparts. We find some explanatory power in all uncertainty measures, with relatively good performance by ex post macro-economic and financial uncertainty. However, real-time versions perform only about as well as other uncertainty measures such as economic policy uncertainty (EPU), a finding we relate to data revisions in the construction of ex post uncertainty. Real-time data and estimation considerations are highly consequential, owing to look-ahead bias. Real-time uncertainty forecasts real-time outcome variables better than it forecasts ex post revised outcome variables.