Uncertainty and monetary policy in good and bad times: A Replication of the VAR investigation by Bloom (2009)

Giovanni Caggiano, Efrem Castelnuovo and Gabriela Nodari

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper revisits the well-known VAR evidence on the real effects of uncertainty shocks by Bloom (Econometrica 2009(3): 623-685. doi: 10.3982/ECTA6248). We replicate the results in a narrow sense using Eviews. In a wide sense, we extend his study by working with a smooth transition-VAR framework that allows for business cycle-dependent macroeconomic responses to an uncertainty shock. We find a significantly stronger response of real activity in recessions. Counterfactual simulations point to a greater effectiveness of systematic monetary policy in stabilizing real activity in expansions.

Keywords: Uncertainty shocks; nonlinear Smooth Transition Vector AutoRegressions; Generalized Impulse Response Functions; systematic monetary policy (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2020-08
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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https://cama.crawford.anu.edu.au/sites/default/fil ... stelnuovo_nodani.pdf (application/pdf)

Related works:
Working Paper: Uncertainty and Monetary Policy in Good and Bad Times: A Replication of the VAR Investigation by Bloom (2009) (2020)
Working Paper: Uncertainty and monetary policy in good and bad times: A replication of the VAR investigation by Bloom (2009) (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2020-74

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