Short and Long Run Uncertainty

Jose Maria Barrero, Nicholas Bloom and Ian Wright

No 23676, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Uncertainty appears to have both a short-run and a long-run component, which we measure using firm and macro implied volatility data from options of 30 days to 10 years duration. We ask what may be driving uncertainty over these different time horizons, finding that oil price volatility is particularly important for short-run uncertainty, policy uncertainty is particularly important for long-run uncertainty, while currency volatility and CEO turnover appear to equally impact short- and long-run uncertainty. Examining a panel of over 4,000 firms from 1996 to 2013 we find that R&D is relatively more sensitive to long-run uncertainty than investment, and in turn investment is relatively more sensitive to long-run uncertainty than hiring. In a simulation model we investigate the channels underlying this pecking-order response to long-run uncertainty, and show that lower depreciation rates and higher adjustment costs lead R&D and investment to be more sensitive to longer-run uncertainty than hiring. Collectively, these results suggest that recent events that have raised long-run policy uncertainty may be particularly damaging to growth by reducing R&D and investment.

JEL-codes: E22 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-mac
Note: AP EFG ME PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (67)

Downloads: (external link)
http://www.nber.org/papers/w23676.pdf (application/pdf)

Related works:
Working Paper: Short- and Long-run Uncertainty (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:23676

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w23676

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().