Confidence and the transmission of macroeconomic uncertainty in U.S. recessions

Fang Zhang ()

Applied Economics, 2017, vol. 49, issue 29, 2893-2909

Abstract: This article studies the role of confidence in the transmission of uncertainty shocks during U.S. recessions. I use smooth-transition vector-autoregression (ST-VAR) to examine the regime-dependent effect of uncertainty shocks, and a counterfactual decomposition to isolate the role of confidence when the economy is in different regimes, recessions and non-recessions. I find that shutting down the confidence channel leads to greatly dampened and less persistent effects of uncertainty shocks, especially during recessions. I also find that the cross-regime difference in the role of confidence can largely explain the cross-regime short-run difference in the effects of uncertainty shocks.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2016.1251554 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:49:y:2017:i:29:p:2893-2909

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2016.1251554

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().