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Author: Giovanni Caggiano Publisher: ISBN: Category : Languages : en Pages : 57
Book Description
We employ a parsimonious nonlinear Interacted-VAR to examine whether the real effects of uncertainty shocks are greater when the economy is at the ZeroLower Bound. We find the contractionary effects of uncertainty shocks to be statistically larger when the ZLB is binding, with differences that are economically important. Our results are shown not to be driven by the contemporaneous occurrence of the Great Recession and high financial stress, and to be robust to different ways of modeling unconventional monetary policy. These findings lend support to recent theoretical contributions on the interaction between uncertainty shocks and the stance of monetary policy.
Author: Giovanni Caggiano Publisher: ISBN: Category : Languages : en Pages : 57
Book Description
We employ a parsimonious nonlinear Interacted-VAR to examine whether the real effects of uncertainty shocks are greater when the economy is at the ZeroLower Bound. We find the contractionary effects of uncertainty shocks to be statistically larger when the ZLB is binding, with differences that are economically important. Our results are shown not to be driven by the contemporaneous occurrence of the Great Recession and high financial stress, and to be robust to different ways of modeling unconventional monetary policy. These findings lend support to recent theoretical contributions on the interaction between uncertainty shocks and the stance of monetary policy.
Author: Susanto Basu Publisher: ISBN: Category : Economics Languages : en Pages : 42
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.
Author: C. James Hueng Publisher: W.E. Upjohn Institute ISBN: 0880996765 Category : Business & Economics Languages : en Pages : 133
Book Description
Policymakers and business practitioners are eager to gain access to reliable information on the state of the economy for timely decision making. More so now than ever. Traditional economic indicators have been criticized for delayed reporting, out-of-date methodology, and neglecting some aspects of the economy. Recent advances in economic theory, econometrics, and information technology have fueled research in building broader, more accurate, and higher-frequency economic indicators. This volume contains contributions from a group of prominent economists who address alternative economic indicators, including indicators in the financial market, indicators for business cycles, and indicators of economic uncertainty.
Author: Publisher: ISBN: 9780753019443 Category : Business Languages : en Pages :
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: Mr.Sebastian Weber Publisher: International Monetary Fund ISBN: 1455219002 Category : Business & Economics Languages : en Pages : 53
Book Description
A traditional argument in favor of flexible exchange rates is that they insulate output better from real shocks, because the exchange rate can adjust and stabilize demand for domestic goods through expenditure switching. This argument is weakened in models with high foreign currency debt and low exchange rate pass-through to import prices. The present study evaluates the empirical relevance of these two factors. We analyze the transmission of real external shocks to the domestic economy under fixed and flexible exchange rate regimes for a broad sample of countries in a Panel VAR and let the responses vary with foreign currency indebtedness and import structure. We find that flexible exchange rates do not insulate output better from external shocks if the country imports mainly low pass-through goods and can even amplify the output response if foreign indebtedness is high.
Author: Laurent Ferrara Publisher: Springer ISBN: 3319790757 Category : Business & Economics Languages : en Pages : 300
Book Description
This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
Author: Hanno Dihle Publisher: ISBN: Category : Languages : en Pages :
Book Description
Abstract: The impact of uncertainty on the decision-making of economic agents, such as firms and households, is a important but often neglected element of micro- and macroeconomic theory. With the onset of the financial crisis in 2007 and the strong increase in uncertainty that accompanied it, the theoretical analysis of this phenomenon has become more important. With the article `The Impact of Uncertainty Shocks', published in 2009, Nicholas Bloom introduced a new facet to the debate surrounding the macroeconomic consequences of uncertainty: the question of what role uncertainty-induced 'real option values' in investment decisions play with regard to business cycle fluctuations. However, the inclusion of real option values in macroeconomic models raises questions that go beyond the effects of uncertainty on the business cycle. In particular, the implementation of specific stochastic processes as the basis of option value analysis, such as the widely used Brownian motion, requires a fundamental theoretical discussion regarding the modeling of uncertainty and its consequences in economic and growth models. The aim of this dissertation is a comprehensive discussion and further development of the theoretical effects of uncertainty in macroeconomic models against the background of the theory of real option values, with a strong focus on the implications of stochastic diffusion processes. The first article examines the effects of uncertainty in the euro crisis. Within a partial investment model, two kinds of uncertainty are introduced: volatility and disaster risk. The article expands the literature by integrating a jump-diffusion process into an entry-exit framework for investment decisions. In addition, SVAR estimates are made for a new country data set on uncertainty. The second article implements uncertainty and irreversibility in a growth model with monopolistic competition. The model integrates both micro- and macroeconomic uncertainty modeled as Brownian motions. The article provides a comprehensive picture of short- and long-term volatility effects. The third article expands the model with a jump-diffusion process to investigate the influence of uncertainty in a development-economic context. The paper expands the literature in the field of development economics with a model that illustrates the effects of different uncertainty shocks on the development process. In the fourth article, the model developed in the second article ...
Author: Giovanni Caggiano
Author: Giovanni Caggiano
Author: Susanto Basu
Author: Minchul Shin
Author: C. James Hueng
Author: 
Author: Mr.Sebastian Weber
Author: Josué Diwambuena
Author: Laurent Ferrara
Author: Seohyun Lee
Author: Hanno Dihle