Tallinn University of Technology

Natalia Levenko, PhD student at the TalTech Department of Economics and Finance, defended on 17 December 2020 her PhD thesis "Uncertainty and Measurement in Macroeconomics".

The thesis consists of three publications covering selected macroeconomic topics with a special focus on economic uncertainty and measurement. The analysis is restricted to European economies as these countries play an important role in the global economy and are typically less studied than the US economy. While the unifying theme for the thesis is economic uncertainty and data quality, the papers focus on different topics, covering growth decomposition, consumer expectations and household saving, and issues related to measuring forecast uncertainty.

The publications of the thesis look at the developments in the European economy from different angles, decomposing economic growth and examining different features of economic uncertainty. The findings of all three publications are relevant for empirical studies, particularly studies of recessions as times when it might be important to have a precise idea of the dynamics of growth and the movements of uncertainty. Below is a summary of the main findings:

  • The results indicate  that TFP growth and capital deepening were the main contributors to output growth in the sample countries before the global financial crisis. During the crisis, the patterns of growth decomposition were quite heterogeneous across the countries, while weak output growth after the crisis was paired with sluggish TFP growth in all of the sample countries.
  • the household  saving  rate   is   persistent   and   is   mostly   driven   by   income   growth   and   labour   income   uncertainty,  the  quantitative  effects  of  these  two  drivers  being  roughly  the  same. Credit  availability,  interest  rates,  and inflation  have  little  or  no  effect  on  saving.  The  findings  of  the  paper  that  expectations  matter  for  the  saving  behaviour  of households might be of importance for policymaking
  • the  mean  individual  variance  of  density  forecasts, which is often referred to in the literature as a direct measure of uncertainty, is a noisy proxy  for  uncertainty  and  is  a  function  of  exogenous  processes  such  as  developments  in  the computer  software  market  or  improved  professional  training.  The  findings  imply  that  the actual  movements  in  forecast  uncertainty  might  have  different dynamics from what might be concluded from looking at the mean individual variance of the forecasts.

Supervisor: Professor Karsten Staehr (TalTech)

Opponents: Mariarosaria Comunale, PhD (Bank of Lithuania) and Associate Professor Lenno Uusküla (University of Tartu)

Full text of the thesis is available at the Taltech Library Digital Collection.

Natalia Levenko and Karsten Staehr
Natalia Levenko and her supervisor Karsten Staehr