Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?

Sydney C. Ludvigson, Sai Ma and Serena Ng ()

American Economic Journal: Macroeconomics, 2021, vol. 13, issue 4, 369-410

Abstract: Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does the type of uncertainty matter? We propose a novel SVAR identification strategy to address these questions via inequality constraints on the structural shocks. We find that sharply higher macroeconomic uncertainty in recessions is often an endogenous response to output shocks, while uncertainty about financial markets is a likely source of output fluctuations.

JEL-codes: D81 E23 E32 E44 G14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (247)

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Working Paper: Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response? (2015)
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DOI: 10.1257/mac.20190171

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