The cost of not knowing: how uncertainty weighs on the euro area economy

08/05/2026 European Central Bank Central banks

Economic uncertainty – the extent to which households, firms, investors and policymakers find it difficult to assess the economic outlook – has increased markedly in recent years with successive geopolitical and trade policy shocks. This article reviews recent developments in various proxies for uncertainty and shows that metrics capturing geopolitical and trade policy uncertainty have remained persistently elevated. The adverse impact of uncertainty shocks on business investment is typically larger and more persistent than the effect on private consumption.

MuSE: a multiple macro-financial scenario simulation engine for stress testing

08/05/2026 European Central Bank Central banks

We design an econometric framework to simulate multiple adverse macro-financial scenarios that can be used in top-down stress tests. First, we create a financial stress index informed by shocks generated via a non-parametric copula estimated on a large dataset of daily financial indicators. Second, we simulate the joint dynamics of macroeconomic indicators conditional on the copula-based financial shocks in a large multi-country Bayesian VAR model.

Forecasting the euro area job vacancy rate with earnings calls data

08/05/2026 European Central Bank Central banks

We analyse whether textual information extracted from firms’ earnings calls can improve forecasts of the euro area job vacancy rate. Using transcripts from euro area headquartered firms, we construct a monthly indicator of labour demand based on keywords related to labour market pressures and include it into a mixed frequency Bayesian VAR alongside standard hard and soft indicators. A pseudo–real-time evaluation shows that earnings calls provide timely and valuable signals for tracking vacancy dynamics.

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