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Components of Uncertainty

Vegard Larsen

No No 4/2017, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: Uncertainty is acknowledged to be a source of economic fluctuations. But, does the type of uncertainty matter for the economy’s response to an uncertainty shock? This paper offers a novel identification strategy to disentangle different types of uncertainty. It uses machine learning techniques to classify different types of news instead of specifying a set of keywords. It is found that, depending on its source, the effects of uncertainty on macroeconomic variable may differ. I find that both good (expansionary effect) and bad (contractionary effect) types of uncertainty exist

Keywords: Newspaper; Topic model; Uncertainty; Business cycles; Machine learning (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-big and nep-hpe
Date: 2017-04
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