On Persistence Of Uncertainty Shocks

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On Persistence Of Uncertainty Shocks

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Author : Sergey Egiev
language : en
Publisher:
Release Date : 2016

On Persistence Of Uncertainty Shocks written by Sergey Egiev and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.

The Impact Of Uncertainty Shocks

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Author :
language : en
Publisher:
Release Date : 2006

The Impact Of Uncertainty Shocks written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Business categories.

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.

Measuring Global And Country Specific Uncertainty

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Author : Ezgi O. Ozturk
language : en
Publisher: International Monetary Fund
Release Date : 2017-10-30

Measuring Global And Country Specific Uncertainty written by Ezgi O. Ozturk and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-10-30 with Business & Economics categories.

Motivated by the literature on the capital asset pricing model, we decompose the uncertainty of a typical forecaster into common and idiosyncratic uncertainty. Using individual survey data from the Consensus Forecasts over the period of 1989-2014, we develop monthly measures of macroeconomic uncertainty covering 45 countries and construct a measure of global uncertainty as the weighted average of country-specific uncertainties. Our measure captures perceived uncertainty of market participants and derives from two components that are shown to exhibit strikingly different behavior. Common uncertainty shocks produce the large and persistent negative response in real economic activity, whereas the contributions of idiosyncratic uncertainty shocks are negligible.

The Common Origin Of Uncertainty Shocks

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Author : Nicholas Kozeniauskas
language : en
Publisher:
Release Date : 2016

The Common Origin Of Uncertainty Shocks written by Nicholas Kozeniauskas and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Business cycles categories.

Various types of uncertainty shocks can explain many phenomena in macroeconomics and finance. But does this just amount to inventing new, exogenous, unobserved shocks to explain challenging features of business cycles? This paper argues that three conceptually distinct fluctuations, all called uncertainty shocks, have a common origin. Specifically, we propose a mechanism that generates micro uncertainty (uncertainty about firm-level shocks), macro uncertainty (uncertainty about aggregate shocks) and higher-order uncertainty (disagreement) shocks from a common origin and causes them to covary, just as they do in the data. When agents use standard maximum likelihood techniques and real-time data to re-estimate parameters that govern the probability of disasters, the result is that micro, macro and higher-order uncertainty fluctuate and covary just like their empirical counterparts. Our findings suggest that time-varying disaster risk and the many types of uncertainty shocks are not distinct phenomena. They are outcomes of a quantitatively plausible belief updating process.

Model Uncertainty Expectation Formation And Shock Persistence

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Author : Jeffrey Conklin Fuhrer
language : en
Publisher:
Release Date : 1985

Model Uncertainty Expectation Formation And Shock Persistence written by Jeffrey Conklin Fuhrer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1985 with Economics categories.

Uncertainty About The Persistence Of Periods With Large Price Shocks And The Optimal Reaction Of The Monetary Authority

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Author : Arnulfo Rodriguez
language : en
Publisher:
Release Date : 2005

Uncertainty About The Persistence Of Periods With Large Price Shocks And The Optimal Reaction Of The Monetary Authority written by Arnulfo Rodriguez and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.

Uncertainty about the persistence of periods characterized by large price shocks is an important aspect of monetary policy. This type of uncertainty posed some difficulties for central banks in 2004. This paper formalizes the treatment of this type of uncertainty by solving an optimal control problem in which the economy randomly alternates between two regimes characterized by different magnitudes of price shocks. By using an open economy model, we find that the optimal policy rule is both regime-contingent and robust. In particular, we find that: a) the optimal reaction of the interest rate is dependent on both the current regime and on the difference in the magnitude of the shocks between regimes; and b) after a robust selection of transition probabilities, the min-max probability of switching to the regime with large price shocks increases when such regime is more harmful. In general, cautious behavior renders smaller losses than recklessness for the monetary authority. This result argues in favor of caution over recklessness in the formulation of monetary policy when there is uncertainty about the persistence of periods with large price shocks.

Uncertainty About The Persistence Of Cost Push Shocks And The Optimal Reaction Of The Monetary Authority

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Author :
language : en
Publisher:
Release Date : 2007

Uncertainty About The Persistence Of Cost Push Shocks And The Optimal Reaction Of The Monetary Authority written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.

Uncertainty Financial Frictions And Nominal Rigidities A Quantitative Investigation

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Author : Ambrogio Cesa-Bianchi
language : en
Publisher: International Monetary Fund
Release Date : 2017-09-29

Uncertainty Financial Frictions And Nominal Rigidities A Quantitative Investigation written by Ambrogio Cesa-Bianchi and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-09-29 with Business & Economics categories.

Are uncertainty shocks a major source of business cycle fluctuations? This paper studies the effect of a mean preserving shock to the variance of aggregate total factor productivity (macro uncertainty) and to the dispersion of entrepreneurs' idiosyncratic productivity (micro uncertainty) in a financial accelerator DSGE model with sticky prices. It explores the different mechanisms through which uncertainty shocks are propagated and amplified. The time series properties of macro and micro uncertainty are estimated using U.S. aggregate and firm-level data, respectively. While surprise increases in micro uncertainty have a larger impact on output than macro uncertainty, these account for a small (non-trivial) share of output volatility.

Uncertainty And Unemployment

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Author : Sangyup Choi
language : en
Publisher: International Monetary Fund
Release Date : 2015-02-23

Uncertainty And Unemployment written by Sangyup Choi and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-02-23 with Business & Economics categories.

We study the role of uncertainty shocks in explaining unemployment dynamics, separating out the role of aggregate and sectoral channels. Using S&P500 data from the first quarter of 1957 to third quarter of 2014, we construct separate indices to measure aggregate and sectoral uncertainty and compare their effects on the unemployment rate in a standard macroeconomic vector autoregressive (VAR) model. We find that aggregate uncertainty leads to an immediate increase in unemployment, with the impact dissipating within a year. In contrast, sectoral uncertainty has a long-lived impact on unemployment, with the peak impact occurring after two years. The results are consistent with a view that the impact of aggregate uncertainty occurs through a “wait-and-see” mechanism while increased sectoral uncertainty raises unemployment by requiring greater reallocation across sectors.

Persistent Stochastic Shocks In A New Keynesian Model With Uncertainty

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Author : Tobias Kranz
language : en
Publisher: Springer
Release Date : 2016-09-27

Persistent Stochastic Shocks In A New Keynesian Model With Uncertainty written by Tobias Kranz and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-09-27 with Business & Economics categories.

The book introduces the New Keynesian framework, historically through a literature overview and through a step-by-step derivation of a New Keynesian Phillips curve, an intertemporal IS curve, and a targeting rule for the central bank. This basic version is then expanded by introducing cost and demand shocks and uncertainty. The latter enters the model via second order Taylor approximation instead of linearization. Bringing all equations together results in an equilibrium condition which is simulated with a wide range of parameter values, including possible crisis scenarios. The author finds that accounting for uncertainty – regarding growth and inflation expectations – can lead to lower nominal interest rates set by the central bank.