Uncertainty and the Great Recession

Benjamin Born, Sebastian Breuer and Steffen Elstner

No 04/2014, Working Papers from German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung

Abstract: Has heightened uncertainty been a major contributor to the Great Recession and the slow recovery in the U.S.? To answer this question, we identify exogenous changes in six uncertainty proxies and quantify their contributions to GDP growth and the unemployment rate. Our results are threefold. First, only a minor part of the rise in uncertainty measures during the Great Recession was driven by exogenous uncertainty shocks. Second, while increased uncertainty explains less than one percentage point of the drop in GDP, macroeconomic uncertainty shocks increased the unemployment rate by up to 0.7 percentage points in 2010 and 2011. Third, economic policy uncertainty had only minor effects on real activity.

Keywords: Uncertainty Shocks; Structural VAR (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Uncertainty and the Great Recession (2018)
Working Paper: Uncertainty and the Great Recession (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:svrwwp:042014

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