Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098153 | Journal of Economic Dynamics and Control | 2016 | 115 Pages |
Abstract
This paper studies the macroeconomic effects of uncertainty shocks with an emphasis on the interaction between elevated uncertainty and credit market conditions when the economy is in different regimes (recessions vs. non-recessions). We use a smooth-transition factor-augmented vector autoregression (ST-FAVAR) and a large monthly panel of U.S. macroeconomic and financial indicators in our estimation. Our findings are twofold. First, while an unanticipated increase in uncertainty has adverse effects on the real economy and financial markets, the effects are quantitatively larger during recessions. Second, the financial channel is important in the transmission of uncertainty shocks, with a greater role during recessions and in the short run.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Aaron Popp, Fang Zhang,