Uncertainty shocks and unemployment dynamics in U.S. recessions

Giovanni Caggiano, Efrem Castelnuovo and Nicolas Groshenny

Journal of Monetary Economics, 2014, vol. 67, issue C, 78-92

Abstract: What are the effects of uncertainty shocks on unemployment dynamics? We answer this question by estimating non-linear (Smooth-Transition) VARs with post-WWII U.S. data. The relevance of uncertainty shocks is found to be much larger than that predicted by standard linear VARs in terms of (i) magnitude of the reaction of the unemployment rate to such shocks, and (ii) contribution to the variance of the prediction errors of unemployment at business cycle frequencies. The ability of different classes of DSGE models to replicate our results is discussed.

Keywords: Uncertainty shocks; Unemployment dynamics; Smooth Transition Vector AutoRegressions; Recessions (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (288)

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Related works:
Working Paper: Uncertainty Shocks and Unemployment Dynamics in U.S. Recessions (2015)
Working Paper: Uncertainty shocks and unemployment dynamics in U.S. recessions (2014)
Working Paper: Uncertainty Shocks and Unemployment Dynamics in U.S. Recessions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:67:y:2014:i:c:p:78-92

DOI: 10.1016/j.jmoneco.2014.07.006

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