Are uncertainty shocks aggregate demand shocks?

By Stefano Fasani, L. Rossi. Economics Letters, 2018

446 citations recorded by the source corpus.

This note considers the Leduc and Liu (JME, 2016) model and studies the effects of their uncertainty shock under different Taylor-type rules. It shows that both the responses of real and nominal variables highly depend on the Taylor rule considered. Remarkably, inflation reacts positively so that uncertainty shocks look more like negative supply shocks, once an empirically plausible degree of interest rate smoothing is taken into account. This result is reinforced with less reactive monetary rules. Overall, these rules alleviate the recession.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/5757ecad0e8ce744163708e1f8dc58327f78cf2d

Citations in the corpus

Estimating the Real Effects of Uncertainty Shocks at the Zero Lower Bound (2017, unknown): “9 Our I-VAR represents a special case of a Generalized Vector Autoregressive (GAR) model ( Mittnik (1990) ).”
Economic Policy Uncertainty Spillovers in Booms and Busts (2019, unknown): “First, we use principal component analysis to extract common factors from the 134 monthly US indicators included in the FRED-MD dataset, recently compiled by McCracken and Ng (2016).22 Second, we consider the rst factor in terms of contribution to the variance of the series belonging to the FRED-MD”
Measuring Uncertainty and Its Impact on the Economy (2016, unknown): “Overall, this picture of price responses is in line with New-Keynesian models, such as Leduc and Liu (2016), Basu and Bundick (2016), and Fernández-Villaverde, Guerrón-Quintana, Kuester, and Rubio-Ramirez (2015), which predict a small eﬀect of uncertainty on inﬂation due to sticky prices (and…”
The global effects of Covid-19-induced uncertainty (2020, unknown): “We thank Silvia Miranda-Agrippino for sending us the series of US onetary policy shocks estimated in Miranda-Agrippino and Rey (2020b). The oil upply shocks series estimated by Baumeister and Hamilton (2019) is available t Christiane Baumeister’s website: https://sites.”
Economic uncertainty and bank risk: Evidence from emerging economies (2020, unknown): “Extant results commonly find a counter-productive force of economic uncertainty to dampen entrepreneurs’ incentive of investment, delay their decisions of hiring, increase households’ precautionary saving and reduce the volume of international trade, suggesting economic uncertainty as one of the mai”