Uncertainty and monetary policy in good and bad times: A replication of the VAR investigation by Bloom (2009)

Giovanni Caggiano, Efrem Castelnuovo and Gabriela Nodari

No 261, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: This paper revisits the well-known VAR evidence on the real effects of uncertainty shocks by Bloom (Econometrica 2009(3): 623-685. doi: 10.3982/ECTA6248). We replicate the results in a narrow sense using Eviews. In a wide sense, we extend his study by working with a smooth transition-VAR framework that allows for business cycle-dependent macroeconomic responses to an uncertainty shock. We find a significantly stronger response of real activity in recessions. Counter-factual simulations point to a greater effectiveness of systematic monetary policy in stabilizing real activity in expansions.

Keywords: Uncertainty shocks; nonlinear Smooth Transition Vector AutoRegressions; Generalized Impulse Response Functions; systematic monetary policy (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2020-08
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Uncertainty and Monetary Policy in Good and Bad Times: A Replication of the VAR Investigation by Bloom (2009) (2020)
Working Paper: Uncertainty and monetary policy in good and bad times: A Replication of the VAR investigation by Bloom (2009) (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0261

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