Uncertainty and Growth Disasters

Boyan Jovanovic () and Sai Ma

No 1279, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper documents several stylized facts on the real effects of economic uncertainty. First, higher uncertainty is associated with a more dispersed and negatively skewed distribution of output growth. Second, the response of economic growth to an increase in uncertainty is highly nonlinear and asymmetric. Third, higher asset volatility magnifies the negative impact of uncertainty on growth. We develop and estimate an analytically tractable model in which rapid adoption of new technology may raise economic uncertainty which causes measured productivity to decline. The equilibrium growth distribution is negatively skewed and higher uncertainty leads to a thicker left tail.

Keywords: Uncertainty and growth; Volatility; Downside risk; Growth at risk (search for similar items in EconPapers)
JEL-codes: D80 E44 O40 O47 (search for similar items in EconPapers)
Pages: 35
Date: 2020-05-07
New Economics Papers: this item is included in nep-dge, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Uncertainty and Growth Disasters (2022)
Working Paper: Uncertainty and Growth Disasters (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1279

DOI: 10.17016/IFDP.2020.1279

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