Uncertainty and Growth Disasters

Boyan Jovanovic () and Sai Ma

No 28024, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper documents several facts on the real effects of economic uncertainty. First, higher uncertainty is associated with a more dispersed distribution of output growth. Second, the relation is highly asymmetric: A rise in uncertainty is associated with a sharp decline in the lower tail of the growth distribution whereas it has a much smaller and insignificant impact on its upper tail. Third, the negative response of growth to uncertainty shocks is larger when the equity market is more volatile. We build a model in which growth and uncertainty are both endogenous: rapid adoption of new technology raises economic uncertainty and may cause measured productivity to decline. The equilibrium growth distribution is negatively skewed and higher uncertainty leads to a thicker left tail and to more labor reallocation among jobs and among

JEL-codes: E3 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-mac
Note: EFG
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Citations: View citations in EconPapers (4)

Published as Boyan Jovanovic & Sai Ma, 2021. "Uncertainty and growth disasters," Review of Economic Dynamics, .

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Journal Article: Uncertainty and Growth Disasters (2022)
Working Paper: Uncertainty and Growth Disasters (2020)
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