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Amplification effects of news shocks through uncertainty

Danilo Cascaldi-Garcia ()

2017 Papers from Job Market Papers

Abstract: In this paper I investigate the empirical relationship between agents' responses to future technological improvements and the level of uncertainty in the economy. I show that the economic responses to news shocks change substantially over time, and that this dynamic couples with periods of high and low uncertainty. Periods of high uncertainty are characterized by higher positive economic effects of news shocks on output, consumption, investment and real personal income. These results indicate that the continuous updating of agents' expectations about the current and future economic situation operates as a transmission channel for news shocks, amplifying its positive outcomes.

JEL-codes: E32 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017-11-20
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