The impact of uncertainty and certainty shocks

Arbeitspapier

I propose a Bayesian quantile VAR to identify and assess the impact of uncertainty and certainty shocks, unifying Bloom's (2009) two identification steps into one. I find that an uncertainty shock widens the conditional distribution of future real economic activity growth, in line with a risk shock. Conversely, a certainty shock (a shock strongly decreasing uncertainty) narrows the conditional distribution of future real activity growth. In addition to the difference in signs, I show that the two shocks are different shocks. Each shock impacts the real economy uniquely. I support this with the underlying events: For instance, uncertainty shocks relate to events such as Black Monday and 9/11, but also to fears about future negative economic outcomes. In contrast, certainty shocks often link to phases of irrational exuberance. Commonly, no distinction is made between uncertainty and certainty shocks. I show that uncertainty shocks become more important if distinguished from certainty shocks.

Angaben zum Objekt

• ISBN: 978-3-95729-687-0
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Deutsche Bundesbank Discussion Paper ; No. 14/2020

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Financial Markets and the Macroeconomy ; Financial Crises
• Thema: Bayesian quantile VAR ; uncertainty shocks ; tail risks ; irrational exuberance

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Schüler, Yves S.
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2020

Weitere Informationen

• Handle: http://hdl.handle.net/10419/215407
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ