Empirical evidence on the dynamics of investment under uncertainty in the US

Qazi Haque, Leandro Magnusson and Kazuki Tomioka

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We study the effects of financial uncertainty on investment dynamics in the U.S. using a vector autoregression with drifting parameters and stochastic volatilities. We find time-varying negative effects of financial uncertainty shocks on investment. These effects have declined in the post-WWII period but became more pronounced in the presence of the zero lower bound episode. We also find that the response of inflation to uncertainty shocks varies over time, and these shocks do not always act like aggregate demand shocks. Remarkably, the relevance of financial uncertainty shocks is found to be negligible during the Great Recession.

Keywords: Uncertainty shocks; investment dynamics; TVP-VARs with stochastic volatility; Bayesian VARs; Great Recession (search for similar items in EconPapers)
JEL-codes: C11 C32 E22 E32 E44 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2019-12
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-ore
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https://cama.crawford.anu.edu.au/sites/default/fil ... agnusson_tomioka.pdf (application/pdf)

Related works:
Journal Article: Empirical Evidence on the Dynamics of Investment Under Uncertainty in the U.S (2021)
Working Paper: Empirical evidence on the dynamics of investment under uncertainty in the U.S (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2019-87

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