Uncertainty and monetary policy in good and bad times: A replication of the vector autoregressive investigation by Bloom (2009)

Giovanni Caggiano, Efrem Castelnuovo and Gabriela Nodari

Journal of Applied Econometrics, 2022, vol. 37, issue 1, 210-217

Abstract: This paper revisits the well‐known vector autoregressive (VAR) evidence on the real effects of uncertainty shocks by Bloom (2009, https://doi.org/10.3982/ECTA6248). We replicate the results in a narrow sense using EViews. In a wide sense, we extend his study by working with a smooth transition VAR framework that allows for business cycle‐dependent macroeconomic responses to an uncertainty shock. We find a significantly stronger response of real activity in recessions. Counterfactual simulations point to a greater effectiveness of systematic monetary policy in stabilizing real activity in expansions.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:37:y:2022:i:1:p:210-217

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