Fluctuations in Uncertainty

Nicholas Bloom

No 13-033, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: Abstract: This review article tries to answer four questions: (i) what are the stylized facts about uncertainty over time; (ii) why does uncertainty vary; (iii) do fluctuations in uncertainty matter; and (iv) did higher uncertainty worsen the Great Recession of 2007-2009? On the first question both macro and micro uncertainty appears to rise sharply in recessions. On the second question the types of exogenous shocks like wars, financial panics and oil price jumps that cause recessions appear to directly increase uncertainty, and uncertainty also appears to endogenously rise further during recessions. On the third question, the evidence suggests uncertainty is damaging for short-run investment and hiring, but there is some evidence it may stimulate longer-run innovation. Finally, in terms of the Great Recession, the large jump in uncertainty in 2008 potentially accounted for about one third of the drop in GDP.

Keywords: Uncertainty; risk; volatility; investment (search for similar items in EconPapers)
JEL-codes: E2 E3 O3 O4 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-mac and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1037)

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Related works:
Journal Article: Fluctuations in uncertainty (2016)
Journal Article: Fluctuations in Uncertainty (2014)
Working Paper: FLUCTUATIONS IN UNCERTAINTY (2014)
Working Paper: Fluctuations in Uncertainty (2013)
Working Paper: Fluctuations in uncertainty (2013)
Working Paper: Fluctuations in Uncertainty (2013)
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