Uncertainty of Firms' Economic Outlook During the COVID-19 Crisis

Author Name MORIKAWA Masayuki (President, RIETI)
Creation Date/NO. May 2021 21-E-042
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This study documents firms' subjective uncertainty during the COVID-19 crisis in Japan using data from an original firm survey and publicly available government statistics. The contributions of this study are (1) the measurement of firms' uncertainty regarding their mid-term economic outlook as subjective confidence intervals, and (2) the comparison of firms' subjective uncertainty during the COVID-19 crisis with that of the Global Financial Crisis by using readily available official statistics. The results indicate that firms' subjective uncertainty increased substantially after the outbreak of the COVID-19 pandemic. The elevation of subjective uncertainty has been far more significant compared with the period of the Global Financial Crisis. However, the economic outlook's deterioration during the COVID-19 crisis has been smaller. The COVID-19 crisis is characterized as an unprecedented uncertainty shock.

This is the English version of the Japanese Discussion Paper (21-J-024) with some additional information and changes.