Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?

By Sydney C. Ludvigson, Sai Ma, Serena Ng. American Economic Journal: Macroeconomics, 2015

655 citations recorded by the source corpus.

Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does the type of uncertainty matter? We propose a novel SVAR identification strategy to address these questions via inequality constraints on the structural shocks. We find that sharply higher macroeconomic uncertainty in recessions is often an endogenous response to output shocks, while uncertainty about financial markets is a likely source of output fluctuations. (JEL D81, E23, E32, E44, G14)

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e038584a050da802a04e9b1e5b8765089bc44a20

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

In Finance

Citations in the corpus

Measuring Geopolitical Risk (2018, background): “5 Ludvigson, Ma, and Ng (2021) and Caldara et al. (2016) study the relationship between economic uncertainty and the business cycle by controlling for financial and economic activity when identifying uncertainty shocks.”
Identifying Shocks via Time-Varying Volatility (2019, methodology): “This is similar to the sets identified via non-Gaussianity (Lanne & Lütkepohl (2010), amongst others), Sims’ implementation of subsample identification (see Section 5), or identification in finite mixture models, and is discussed in Chapter 14 of Kilian & Lütkepohl (2017).”
Global spillover effects of US uncertainty (2017, background): “[25] Ludvigson, Sydney, Sai Ma, and Serena Ng (2015), “Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?” working paper.”