Macroeconomic uncertainty : what is it , how can we measure it and why does it matter ?

Since mid-2008, the UK economy has faced an unprecedented series of large adverse shocks that have led companies and households to become more uncertain about future economic prospects. These shocks include one of the United Kingdom’s largest ever financial crises, continuing headwinds from the euro-area debt crisis and the implementation of the Government’s fiscal consolidation programme. The unusual size and nature of these shocks might have led households and companies to reassess their beliefs about the range of possible paths the economy can take. In other words, they may have become more ‘uncertain’ about the current and future economic climate.