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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: 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: Jesús Fernández-Villaverde
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
Get Book Here
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: Francesco Bianchi
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 0
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Book Description
Author: MissStephanie Denis
Publisher: International Monetary Fund
ISBN: 161635562X
Category : Business & Economics
Languages : en
Pages : 46
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Book Description
This paper quantifies the economic impact of uncertainty shocks in the UK using data that span the recent Great Recession. We find that uncertainty shocks have a significant impact on economic activity in the UK, depressing industrial production and GDP. The peak impact is felt fairly quickly at around 6-12 months after the shock, and becomes statistically negligible after 18 months. Interestingly, the impact of uncertainty shocks on industrial production in the UK is strikingly similar to that of the US both in terms of the shape and magnitude of the response. However, unemployment in the UK is less affected by uncertainty shocks. Finally, we find that uncertainty shocks can account for about a quarter of the decline in industrial production during the Great Recession.
Author: Ambrogio Cesa-Bianchi
Publisher: International Monetary Fund
ISBN: 1484320727
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.
Author: A. W. Mullineux
Publisher: Bookboon
ISBN: 8776818853
Category : Business cycles
Languages : en
Pages : 146
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Book Description
Author: Mohan Bijapur
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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Book Description
We study jointly the roles of aggregate and idiosyncratic uncertainty shocks in driving business cycle fluctuations. By decomposing total stock return volatility of approximately 30,000 publicly-listed US firms from 1962 to 2012, we construct distinct measures of aggregate and idiosyncratic uncertainty, and run a horse race between them in an otherwise standard macroeconomic VAR. We find that the two components of uncertainty exhibit strikingly different behaviour. Idiosyncratic uncertainty shocks account for a large fraction of fluctuations in economic activity at business cycle frequencies, whereas the contributions of aggregate uncertainty shocks are negligible. Idiosyncratic, not aggregate, uncertainty shocks produce the “sharp drop and rapid rebound” response in activity characterized in Bloom (2009). Furthermore, most of the contribution of idiosyncratic uncertainty shocks appears to come from the largest 100 firms in the economy. These act as a primary force driving the business cycle, accounting for up to half of all fluctuations and exhibiting substantial independent variation from common structural forces. In contrast, shocks to the remaining mass of small firms are found to be quantitatively insignificant. Our results are interpreted as an empirical microfoundation for “granular” origins to the role of idiosyncratic uncertainty at the macroeconomic level, in the sense of Gabaix (2011).
Author: Nick Bloom
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 39
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Book Description
Abstract: We propose uncertainty shocks as a new shock that drives business cycles. First, we demonstrate that microeconomic uncertainty is robustly countercyclical, rising sharply during recessions, particularly during the Great Recession of 2007-2009. Second, we quantify the impact of time-varying uncertainty on the economy in a dynamic stochastic general equilibrium model with heterogeneous firms. We find that reasonably calibrated uncertainty shocks can explain drops and rebounds in GDP of around 3%. Moreover, we show that increased uncertainty alters the relative impact of government policies, making them initially less effective and then subsequently more effective
Author: Sangyup Choi
Publisher: International Monetary Fund
ISBN: 1498356303
Category : Business & Economics
Languages : en
Pages : 26
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Book Description
We study the role of uncertainty shocks in explaining unemployment dynamics, separating out the role of aggregate and sectoral channels. Using S&P500 data from the first quarter of 1957 to third quarter of 2014, we construct separate indices to measure aggregate and sectoral uncertainty and compare their effects on the unemployment rate in a standard macroeconomic vector autoregressive (VAR) model. We find that aggregate uncertainty leads to an immediate increase in unemployment, with the impact dissipating within a year. In contrast, sectoral uncertainty has a long-lived impact on unemployment, with the peak impact occurring after two years. The results are consistent with a view that the impact of aggregate uncertainty occurs through a “wait-and-see” mechanism while increased sectoral uncertainty raises unemployment by requiring greater reallocation across sectors.
Author: Susanto Basu
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 42
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Book Description
Can increased uncertainty about the future cause a contraction in output and its components? This paper examines the role of uncertainty shocks in a one-sector, representative-agent, dynamic, stochastic general-equilibrium model. When prices are flexible, uncertainty shocks are not capable of producing business-cycle comovements among key macroeconomic variables. With countercyclical markups through sticky prices, however, uncertainty shocks can generate fluctuations that are consistent with business cycles. Monetary policy usually plays a key role in offsetting the negative impact of uncertainty shocks. If the central bank is constrained by the zero lower bound, then monetary policy can no longer perform its usual stabilizing function and higher uncertainty has even more negative effects on the economy. We calibrate the size of uncertainty shocks using fluctuations in the VIX and find that increased uncertainty about the future may indeed have played a significant role in worsening the Great Recession, which is consistent with statements by policymakers, economists, and the financial press.
