Searching the nature of uncertainty: Macroeconomic and financial risks VS geopolitical and pandemic risks

Nicolas Himounet

International Economics, 2022, issue 170, 1-31

Abstract: A growing empirical literature on how to measure uncertainty has emerged following the 2007–2008 financial crisis. This paper first reviews the different methods measuring uncertainty. Second, applying a principal component analysis (PCA) that includes the various measures of uncertainty provided by the literature, a monthly global measure of uncertainty for the United States on the period 1990–2020 is developed. If the first factor computes a general level of uncertainty, the second factor provides a switch between two natures of uncertainty: macroeconomic and financial. Applying a new SVAR framework where the identification of uncertainty shocks relies on event constraints, we get a negative effect of US general uncertainty on industrial production.

Keywords: Uncertainty; Principal component analysis; Economic activity; SVAR (search for similar items in EconPapers)
JEL-codes: C38 D80 E32 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepiie:2022-q2-170-1

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