Frequency-Dependent Real-Time Effects of Uncertainty in the United States: Evidence from Daily Data
Yanele Nyamela (),
Vasilios Plakandaras () and
Rangan Gupta ()
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Yanele Nyamela: Department of Economics, University of Pretoria, Pretoria, South Africa
No 201833, Working Papers from University of Pretoria, Department of Economics
In this paper, we analyze the impact of uncertainty shocks at the daily-frequency on key macroeconomic variables for the United States. In doing so, we use a vector autoregressive (VAR) model, including the inflation rate, a real-time measure of economic activity and a measure of monetary policy as endogenous variables and decompose uncertainty effects into short, medium and long-term based on a discrete-time Fourier transformation. Aggregate results (prior to decomposition) show that an increase in economic uncertainty has a significant expansionary impact on monetary policy. However, when we decompose uncertainty into its short-, medium- and long-run components, we find that economic activity is affected negatively in a statistically significant manner to shocks in low-frequency uncertainty, while, statistically significant monetary expansion is observed under shocks to relatively high frequencies of uncertainty.
Keywords: Uncertainty; Frequency-Dependence; Daily Data (search for similar items in EconPapers)
JEL-codes: C32 E31 E32 E52 (search for similar items in EconPapers)
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