Frequency-dependent real-time effects of uncertainty in the United States: evidence from daily data

Yanele Nyamela, Vasilios Plakandaras and Rangan Gupta

Applied Economics Letters, 2020, vol. 27, issue 19, 1562-1566

Abstract: In this paper, we analyse the impact of uncertainty shocks at the daily-frequency on key macroeconomic variables for the United States. In doing so, we use a vector autoregressive (VAR) model, including the inflation rate, a real-time measure of economic activity and a measure of monetary policy as endogenous variables and decompose uncertainty effects into short, medium and long-term based on a discrete-time Fourier transformation. Aggregate results (prior to decomposition) show that an increase in economic uncertainty has a significant expansionary impact on monetary policy. However, when we decompose uncertainty into its short-, medium- and long-run components, we find that economic activity is affected negatively in a statistically significant manner to shocks in low-frequency uncertainty, while, statistically significant monetary expansion is observed under shocks to relatively high frequencies of uncertainty.

Date: 2020
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Working Paper: Frequency-Dependent Real-Time Effects of Uncertainty in the United States: Evidence from Daily Data (2018)
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DOI: 10.1080/13504851.2019.1697419

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