Macroeconomic Effects of Financial Uncertainty

Konferenzbeitrag

This paper investigates the macroeconomic effects of uncertainty originating in the financial sector. My contribution is twofold. First, I document empirical relevenace of financial uncertainty using SVAR methods. Then, I employ the DSGE framework developed by Gertler and Karadi (2011) to uncover the underlying transmission mechanism. The model generates macroeconomic dynamics that are consistent with the SVAR evidence. In particular, an increase in financial uncertainty raises the risk premium and leads to a decline in output, consumption, investment and hours worked. This outcome arises mainly because of an endogenous tightening of the financial constraint, which in turn triggers the financial accelerator mechanism. Finally, internal habit formation and nominal rigidities act as additional amplification mechanisms for financial uncertainty shocks.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: Macrofinance I ; No. E11-V3

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Macroeconomics: Consumption; Saving; Wealth
• Subject: Stochastic Volatility ; Financial Frictions ; Financial Uncertainty

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dlugoszek, Grzegorz
• Event: Veröffentlichung
• (who): ZBW - Leibniz-Informationszentrum Wirtschaft
• (where): Kiel, Hamburg
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/181596
• Last update: 10.03.2025, 11:43 AM CET