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Economic Policy Uncertainty and Unemployment in the United States: A Nonlinear Approach

Giovanni Caggiano (), Efrem Castelnuovo () and Juan Manuel Figueres

No 7105, CESifo Working Paper Series from CESifo Group Munich

Abstract: We model U.S. post-WWII monthly data with a Smooth Transition VAR model and study the effects of an unanticipated increase in economic policy uncertainty on unemployment in recessions and expansions. We find the response of unemployment to be statistically and economically larger in recessions. A state-contingent forecast error variance decomposition analysis confirms that the contribution of EPU shocks to the volatility of unemployment at business cycle frequencies is markedly larger in recessions.

Keywords: economic policy uncertainty shocks; unemployment dynamics; Smooth Transition Vector AutoRegressions; recessions; expansions (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2018
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Related works:
Journal Article: Economic policy uncertainty and unemployment in the United States: A nonlinear approach (2017) Downloads
Working Paper: Economic Policy Uncertainty and Unemployment in the United States: A Nonlinear Approach (2017) Downloads
Working Paper: Economic Policy Uncertainty and Unemployment in the United States: A Nonlinear Approach (2016) Downloads
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