Sectoral Uncertainty

Efrem Castelnuovo, Kerem Tuzcuoglu and Luis Uzeda

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

Abstract: We propose a new empirical framework that jointly decomposes the conditional variance of economic time series into a common and a sector-specific uncertainty component. We apply our framework to a large dataset of disaggregated industrial production series for the US economy. Our results indicate that common uncertainty and uncertainty linked to nondurable goods both recorded their pre-pandemic global peaks during the 1973-75 recession. In contrast, durable goods uncertainty recorded its pre-pandemic peak during the global financial crisis of 2008-09. Vector autoregression exercises identify unexpected changes in durable goods uncertainty as drivers of downturns that are both economically and statistically significant, while unexpected hikes in nondurable goods uncertainty are expansionary. Our findings suggest that: (i) uncertainty is heterogeneous at a sectoral level; and (ii) durable goods uncertainty may drive some business cycle effects typically attributed to aggregate uncertainty.

Keywords: Dynamic Factor; Uncertainty; Stochastic Volatility; Sectors (search for similar items in EconPapers)
JEL-codes: C51 C55 E32 E44 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2022-10
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https://cama.crawford.anu.edu.au/sites/default/fil ... _tuzcuoglu_uzeda.pdf (application/pdf)

Related works:
Chapter: Sectoral uncertainty (2024)
Working Paper: Sectoral Uncertainty (2022)
Working Paper: Sectoral Uncertainty (2022)
Working Paper: Sectoral Uncertainty (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2022-62

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