Characterizing very high uncertainty episodes

Martin Bijsterbosch and Pierre Guérin

Economics Letters, 2013, vol. 121, issue 2, 239-243

Abstract: This paper uses a two-step approach to characterize the evolution of US macroeconomic and financial variables during episodes of very high uncertainty. First, we identify episodes of very high uncertainty using a regime-switching model. Second, we assess the behavior of macroeconomic and financial variables during these episodes of very high uncertainty. This methodology is analogous to the approach followed by Baele et al. (2012), who study episodes of flights to safety in financial markets. We find that very high uncertainty episodes are associated with a weaker growth performance and sharp declines in stock prices.

Keywords: Uncertainty; Markov-switching; Survey data (search for similar items in EconPapers)
JEL-codes: C24 D80 E32 E66 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (20)

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Working Paper: Characterizing very high uncertainty episodes (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:121:y:2013:i:2:p:239-243

DOI: 10.1016/j.econlet.2013.08.005

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