Uncertainty Shocks in a Model of Effective Demand PDF Download
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Author: Susanto Basu
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Susanto Basu
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Author: Susanto Basu
Publisher:
ISBN:
Category :
Languages : en
Pages : 7
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Book Description
De Groot, Richter, and Throckmorton (2018) argue that the model in Basu and Bundick (2017) can match the empirical evidence only because the model assumes an asymptote in the economy's response to an uncertainty shock. In this Reply, we provide new results showing that our model's ability to match the data does not rely either on assuming preferences that imply an asymptote nor on a particular value of the intertemporal elasticity of substitution. We demonstrate that shifting to preferences that are not vulnerable to the Comment's critique does not change our previous conclusions about the propagation of uncertainty shocks to macroeconomic outcomes.
Author: Oliver De Groot
Publisher:
ISBN:
Category : Consumers' preferences
Languages : en
Pages : 13
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Book Description
"Basu and Bundick (2017) show a second moment intertemporal preference shock creates meaningful declines in output in a sticky price model with Epstein and Zin (1991) preferences. The result, however, rests on the way they model the shock. If a preference shock is included in Epstein-Zin preferences, the distributional weights on current and future utility must sum to 1, otherwise it creates an asymptote in the response to the shock with unit intertemporal elasticity of substitution. When we change the preferences so the weights sum to 1, the asymptote disappears as well as their main results--uncertainty shocks generate small increases in output and comovement with consumption and investment that is at odds with the data. We examine three changes to the model--recalibration, a risk-premium shock, and a disaster risk-type shock--to try and restore their results, but in all three cases the model is unable to match VAR evidence."--Abstract from publisher's website.
Author: Hiroshi Morita
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The nonlinear effects of uncertainty shocks on U.S. macroeconomic activity are examined using a smooth transition VAR model in which the dynamic relationship between the variables changes with the level of economic policy uncertainty. We find that the responses of the variables change with the level of uncertainty, and in particular, the sign of the response of the inflation rate reverses. The empirical evidence suggests that the behaviors of the shifts in aggregate demand and aggregate supply functions induced by uncertainty shocks depend on the current uncertainty level.
Author: Valeriu Nalban
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Jonathan Heathcote
Publisher: DIANE Publishing
ISBN: 1437934919
Category : Business & Economics
Languages : en
Pages : 61
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Book Description
The authors conducted a systematic empirical study of cross-sectional inequality in the U.S., integrating data from various surveys. The authors follow the mapping suggested by the household budget constraint from individual wages to individual earnings, to household earnings, to disposable income, and, ultimately, to consumption and wealth. They document a continuous and sizable increase in wage inequality over the sample period. Changes in the distribution of hours worked sharpen the rise in earnings inequality before 1982, but mitigate its increase thereafter. Taxes and transfers compress the level of income inequality, especially at the bottom of the distribution, but have little effect on the overall trend. Charts and tables. This is a print-on-demand publication; it is not an original.
Author:
Publisher:
ISBN: 9780753019443
Category : Business
Languages : en
Pages :
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Book Description
Uncertainty appears to vary strongly over time, temporarily rising by up to 200% around major shocks like the Cuban Missile crisis, the assassination of JFK and 9/11. This paper offers the first structural framework to analyze uncertainty shocks. I build a model with a time varying second moment, which is numerically solved and estimated using firm level data. The parameterized model is then used to simulate a macro uncertainty shock, which produces a rapid drop and rebound in employment, investment and productivity, and a moderate loss in GDP. This temporary impact of a second moment shock is different from the typically persistent impact of a first moment shock, highlighting the importance for policymakers of identifying their relative magnitudes in major shocks. The simulation of an uncertainty shock is then compared to actual 9/11 data, displaying a surprisingly good match.
Author: Jesús Fernández-Villaverde
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 52
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Book Description
We review the literature on uncertainty shocks and business cycle research. First, we motivate the study of uncertainty shocks by documenting the presence of time-variation in the volatility of macroeconomic time series. Second, we enumerate the mechanisms that researchers have postulated to link uncertainty shocks and business cycles. Third, we outline how we can specify uncertainty shocks. Fourth, we postulate a real business cycle model augmented with financial frictions and uncertainty shocks. Fifth, we use the model to illustrate our previous discussions and to show how uncertainty shocks can be expansionary.
Author: Joonseok Jason Oh
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Ambrogio Cesa-Bianchi
Publisher: International Monetary Fund
ISBN: 1484324013
Category : Business & Economics
Languages : en
Pages : 45
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Book Description
Are uncertainty shocks a major source of business cycle fluctuations? This paper studies the effect of a mean preserving shock to the variance of aggregate total factor productivity (macro uncertainty) and to the dispersion of entrepreneurs' idiosyncratic productivity (micro uncertainty) in a financial accelerator DSGE model with sticky prices. It explores the different mechanisms through which uncertainty shocks are propagated and amplified. The time series properties of macro and micro uncertainty are estimated using U.S. aggregate and firm-level data, respectively. While surprise increases in micro uncertainty have a larger impact on output than macro uncertainty, these account for a small (non-trivial) share of output volatility.
