A Positive Effect of Uncertainty Shocks on the Economy: Is the Chase Over ?

Francisco Serranito, Julien Vauday and Nicolas Himounet ()

No 2022-26, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: How large and persistent are the effects of uncertainty shocks on the economy? Are the effects of macroeconomic uncertainty shocks different from those of financial uncertainty shocks? In the empirical literature there was a consensus on an estimated negative impactof uncertainty on macroeconomic variables. Recently, some studies identifying shocks with a novel methodology, namely the events constraint approach, find that macroeconomic uncertainty shocks may trigger an increase in the industrial production. The goal of this paperis to question this striking result. We have identified two main shortcomings in this literature that could explain the positive correlation between macroeconomic uncertainty and economic activity. We show that this method of identification can be sensitive dependingon how to identify and select the structural uncertainty shocks in a SVAR model. Our main conclusion is that the controversial result of a positive effect of macroeconomic uncertainty on economic activity does not yet seem to be proven. Whether financial or macroeconomic,there is no evidence allowing for rejection of the hypothesis that they have a negative impact on economic activity.

Keywords: Uncertainty; SVAR; Narrative Sign Restrictions; Economic Activity (search for similar items in EconPapers)
JEL-codes: D80 E32 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://economix.fr/pdf/dt/2022/WP_EcoX_2022-26.pdf (application/pdf)

Related works:
Working Paper: A Positive Effect of Uncertainty Shocks on the Economy: Is the Chase Over ? (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2022-26

Access Statistics for this paper

More papers in EconomiX Working Papers from University of Paris Nanterre, EconomiX Contact information at EDIRC.
Bibliographic data for series maintained by Valerie Mignon ( this e-mail address is bad, please contact ).