The origins and effects of macroeconomic uncertainty

Francesco Bianchi, Howard Kung and Mikhail Tirskikh

Quantitative Economics, 2023, vol. 14, issue 3, 855-896

Abstract: We estimate a production‐based general equilibrium model featuring demand‐ and supply‐side uncertainty and an endogenous term premium. Using term structure and macroeconomic data, we find sizable effects of uncertainty on risk premia and business cycle fluctuations. Both demand‐ and supply‐side uncertainty imply large contractions in real activity and an increase in term premia, but supply‐side uncertainty has larger effects on inflation and investment. We introduce a novel analytical decomposition to illustrate how multiple distinct endogenous risk wedges account for these differences. Supply and demand uncertainty are strongly correlated in the beginning of our sample, but decouple after the Great Recession.

Date: 2023
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Citations: View citations in EconPapers (2)

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https://doi.org/10.3982/QE1979

Related works:
Working Paper: The Origins and Effects of Macroeconomic Uncertainty (2019)
Working Paper: The Origins and Effects of Macroeconomic Uncertainty (2019)
Working Paper: The Origins and Effects of Macroeconomic Uncertainty (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:quante:v:14:y:2023:i:3:p:855-896

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