Estimating the Real Effects of Uncertainty Shocks at the Zero Lower Bound

By Giovanni Caggiano, Efrem Castelnuovo, Giovanni Pellegrino. Social Science Research Network, 2017

198 citations recorded by the source corpus.

We employ a parsimonious nonlinear Interacted-VAR to examine whether the real effects of uncertainty shocks are greater when the economy is at the Zero Lower 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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/842f1c71e7d9587932495844f4085339f867d4bd

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Khandokar Istiak
2. Apostolos Serletis
3. Lutz Kilian
4. George Filis
5. Stavros Degiannakis *

Citations in the corpus

• Policy Uncertainty in Japan (2017, unknown): “Caggiano et al. (2017) find empirical support for this prediction.”
• Economic policy uncertainty and real output: evidence from the G7 countries (2018, background): “Similar arguments are found in Bloom et al. (2018) and Caggiano, Castelnuovo, and Pellegrino (2017) who argued that uncertainty is one of the principal drivers of the depth and duration of the recent Great Recession.”