Artikel
THE PROPAGATION OF UNCERTAINTY SHOCKS: ROTEMBERG VERSUS CALVO
This article studies the effects of uncertainty shocks on economic activity, focusing on inflation. Using a vector autoregression, I show that increased uncertainty has negative demand effects, reducing GDP and prices. I then consider standard New Keynesian models with Rotemberg-type and Calvo-type price rigidities. Despite the belief that the two schemes are equivalent, I show that they generate different dynamics in response to uncertainty shocks. In the Rotemberg model, uncertainty shocks decrease output and inflation, in line with the empirical results. By contrast, in the Calvo model, uncertainty shocks decrease output but raise inflation because of firms' precautionary pricing motive.
- Language
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Englisch
- Bibliographic citation
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Journal: International Economic Review ; ISSN: 1468-2354 ; Volume: 61 ; Year: 2020 ; Issue: 3 ; Pages: 1097-1113 ; Hoboken, NJ: Wiley
- Classification
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Wirtschaft
- Event
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Geistige Schöpfung
- (who)
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Oh, Joonseok
- Event
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Veröffentlichung
- (who)
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Wiley
- (where)
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Hoboken, NJ
- (when)
-
2020
- DOI
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doi:10.1111/iere.12450
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Oh, Joonseok
- Wiley
Time of origin
- 2020
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