Macroeconomic Uncertainty and Vector Autoregressions

Mario Forni, Luca Gambetti and Luca Sala

No 15692, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We estimate measures of macroeconomic uncertainty and compute the effects of uncertainty shocks by means of a new simple procedure based on standard VARs. Uncertainty and its effects are estimated using a single model so to ensure internal consistency. Under suitable assumptions, our procedure is equivalent to using the square of the VAR forecast error as an external instrument in a proxy SVAR. Our procedure allows to add orthogonality constraints to the standard proxy SVAR identification scheme. We apply our method to a US data set; we find that uncertainty is mainly exogenous and is responsible of a large fraction of business-cycle fluctuations.

Keywords: Uncertainty shocks; Var models; Ols estimation; stochastic volatility (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-mac and nep-ore
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Citations: View citations in EconPapers (2)

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Working Paper: Macroeconomic Uncertainty and Vector Autoregressions (2020)
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