Uncertainty Shocks and Business Cycle Research

Jesus Fernandez-Villaverde and Pablo Guerron

No 26768, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We review the literature on uncertainty shocks and business cycle research. First, we motivate the study of uncertainty shocks by documenting the presence of time-variation in the volatility of macroeconomic time series. Second, we enumerate the mechanisms that researchers have postulated to link uncertainty shocks and business cycles. Third, we outline how we can specify uncertainty shocks. Fourth, we postulate a real business cycle model augmented with financial frictions and uncertainty shocks. Fifth, we use the model to illustrate our previous discussions and to show how uncertainty shocks can be expansionary.

JEL-codes: E30 E32 E50 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-dge and nep-mac
Note: EFG
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Citations: View citations in EconPapers (32)

Published as Jesús Fernández-Villaverde & Pablo A. Guerrón-Quintana, 2020. "Uncertainty shocks and business cycle research," Review of Economic Dynamics, vol 37, pages S118-S146.

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Journal Article: Uncertainty Shocks and Business Cycle Research (2020)
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