Do Plants Freeze Upon Uncertainty Shocks?

Ariel Mecikovsky and Matthias Meier

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: What explains the impact of uncertainty shocks on the economy? This paper uses highly disaggregated data on industry-level job flows to investigate the empirical relevance of various transmission channels of uncertainty shocks. The channels we consider are labor adjustment frictions, capital adjustment frictions, nominal ridigities, and financial frictions. For each channel, we derive testable implications regarding the response of job flows to uncertainty shocks. Empirically, uncertainty shocks lead to more job destruction and less job creation in more than 80% of all industries. The effect is significantly stronger in industries that face tighter financial constraints, which supports the financial frictions channel. In contrast, our evidence does not support the other three channels.

Keywords: Uncertainty shocks; Job Flows; Financial Frictions (search for similar items in EconPapers)
JEL-codes: E02 E03 (search for similar items in EconPapers)
Pages: 37
Date: 2019-03
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Do plants freeze upon uncertainty shocks? (2014)
Working Paper: Do plants freeze upon uncertainty shocks? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2019_075

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