Really Uncertain Business Cycles
Nicholas Bloom (),
Nir Jaimovich (),
Itay Saporta-Eksten and
Stephen Terry ()
Authors registered in the RePEc Author Service: Max Flötotto and
Itay Saporta Eksten ()
No 18245, NBER Working Papers from National Bureau of Economic Research, Inc
We propose uncertainty shocks as a new shock that drives business cycles. First, we demonstrate that microeconomic uncertainty is robustly countercyclical, rising sharply during recessions, particularly during the Great Recession of 2007-2009. Second, we quantify the impact of time-varying uncertainty on the economy in a dynamic stochastic general equilibrium model with heterogeneous firms. We find that reasonably calibrated uncertainty shocks can explain drops and rebounds in GDP of around 3%. Moreover, we show that increased uncertainty alters the relative impact of government policies, making them initially less effective and then subsequently more effective.
JEL-codes: E3 (search for similar items in EconPapers)
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Published as Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saportaâ€ Eksten & Stephen J. Terry, 2018. "Really Uncertain Business Cycles," Econometrica, Econometric Society, vol. 86(3), pages 1031-1065, May.
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Journal Article: Really Uncertain Business Cycles (2018)
Working Paper: REALLY UNCERTAIN BUSINESS CYCLES (2014)
Working Paper: Really Uncertain Business Cycles (2013)
Working Paper: Really uncertain business cycles (2013)
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