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Author: MissStephanie Denis Publisher: International Monetary Fund ISBN: 161635562X Category : Business & Economics Languages : en Pages : 46
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: MissStephanie Denis Publisher: International Monetary Fund ISBN: 161635562X Category : Business & Economics Languages : en Pages : 46
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: Wensheng Kang Publisher: ISBN: Category : Languages : en Pages : 41
Book Description
We constructed a new index of global uncertainty using the first principal component of the stock market volatility for the largest 15 economies. We evaluate the impact of global uncertainty on the global economy using the new global database from Global Economic Indicators (DGEI), Federal Reserve Bank of Dallas. Global uncertainty shocks are less frequent than those observed in data on the U.S. economy. Global uncertainty shocks are associated with a sharp decline in global inflation, global growth and in the global interest rate (based on official/policy interest rates set by central banks). Our decomposition of global uncertainty shocks shows that global financial uncertainty shocks are more important than non-financial shocks. Over the period 1981 to 2014 global financial uncertainty forecasts 18.26% and 14.95% of the variation in global growth and global inflation respectively. The non-financial uncertainty shocks have insignificant effects on global growth. The model for global variables shows more protracted and substantial negative effects of uncertainty on growth and inflation than does a panel model estimating associations of local country-level variables. This outcome is reversed for the effect of uncertainty on official interest rate.
Author: Yves S. Schüler Publisher: ISBN: 9783957296870 Category : Languages : en Pages :
Book Description
I propose a Bayesian quantile VAR to identify and assess the impact of uncertainty and certainty shocks, unifying Bloom's (2009) two identification steps into one. I find that an uncertainty shock widens the conditional distribution of future real economic activity growth, in line with a risk shock. Conversely, a certainty shock (a shock strongly decreasing uncertainty) narrows the conditional distribution of future real activity growth. In addition to the difference in signs, I show that the two shocks are different shocks. Each shock impacts the real economy uniquely. I support this with the underlying events: For instance, uncertainty shocks relate to events such as Black Monday and 9/11, but also to fears about future negative economic outcomes. In contrast, certainty shocks often link to phases of irrational exuberance. Commonly, no distinction is made between uncertainty and certainty shocks. I show that uncertainty shocks become more important if distinguished from certainty shocks.
Author: Jens Biewer Publisher: GRIN Verlag ISBN: 3346132595 Category : Business & Economics Languages : en Pages : 63
Book Description
Master's Thesis from the year 2020 in the subject Economics - Case Scenarios, grade: 1,3, University of Trier, language: English, abstract: This work deals with the economic impact of uncertainty on macroeconomically important variables in three countries: France, Germany and the United Kingdom. First, the econometric bases are derived, starting with a univariate case. With the introduction of the vector autoregressive model, time series of variables are included, which all depend on and influence each other. Subsequently, the individual preparations, such as Cholesky decomposition, are made to derive the innovations that flow into the system. After the data and variables to be considered for the model have been described in detail, stationarity tests must be carried out to enable consistent estimates to be made later. For this it is necessary to perform additional transformations. Finally, the VAR model is estimated and the results can be visualized and interpreted. It is shown that short-term shocks in uncertainty have different impacts on the variables under consideration. In addition, country-specific responses can be identified in the course of the Impulse Response Functions, differing in terms of amplitude, direction, behavior and persistence. With the help of Forecast Error Variance Decompositions, interdependencies between variables can be identified and possibly put into a logical, functional context.
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: Jonathan Heathcote Publisher: DIANE Publishing ISBN: 1437934919 Category : Business & Economics Languages : en Pages : 61
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 :
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: Publisher: ISBN: Category : Languages : en Pages :
Book Description
The extraordinary events surrounding the Great Recession have cast a considerable doubt on the traditional sources of macroeconomic instability. In their place, economists have singled out financial and uncertainty shocks as potentially important drivers of economic fluctuations. Empirically distinguishing between these two types of shocks, however, is difficult because increases in economic uncertainty are strongly associated with a widening of credit spreads, an indication of a tightening in financial conditions. This paper uses the penalty function approach within the SVAR framework to examine the interaction between financial conditions and economic uncertainty and to trace out the impact of these two types of shocks on the economy. The results indicate that (1) financial shocks have a significant adverse effect on economic outcomes and that such shocks were an important source of cyclical fluctuations since the mid-1980s; (2) uncertainty shocks, especially those implied by uncertainty proxies that do not rely on financial asset prices, are also an important source of macroeconomic disturbances; and (3) uncertainty shocks have an especially negative economic impact in situations where they elicit a concomitant tightening of financial conditions. Evidence suggests that the Great Recession was likely an acute manifestation of the toxic interaction between uncertainty and financial shocks.
Author: Eric M. Leeper Publisher: International Monetary Fund ISBN: 1475558244 Category : Business & Economics Languages : en Pages : 65
Book Description
News - or foresight - about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading example of foresight, simple theory makes transparent the economic behavior and information structures that generate non-fundamental equilibria. Econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes; biases are quantitatively important when two canonical theoretical models are taken as data generating processes. Both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized information flows. Different methods for extracting or hypothesizing the information flows are discussed and shown to be alternative techniques for resolving a non-uniqueness problem endemic to moving average representations.
Author: MissStephanie Denis
Author: MissStephanie Denis
Author: Wensheng Kang
Author: Yves S. Schüler
Author: Jens Biewer
Author: Susanto Basu
Author: Jonathan Heathcote
Author: 
Author: 
Author: Chris Redl
Author: Eric M. Leeper