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Searching the nature of uncertainty: Macroeconomic and financial risks VS geopolitical and pandemic risks

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  • Nicolas Himounet

Abstract

A growing empirical literature on how to measure uncertainty has emerged following the 2007–2008 financial crisis. This paper first reviews the different methods measuring uncertainty. Second, applying a principal component analysis (PCA) that includes the various measures of uncertainty provided by the literature, a monthly global measure of uncertainty for the United States on the period 1990–2020 is developed. If the first factor computes a general level of uncertainty, the second factor provides a switch between two natures of uncertainty: macroeconomic and financial. Applying a new SVAR framework where the identification of uncertainty shocks relies on event constraints, we get a negative effect of US general uncertainty on industrial production.

Suggested Citation

  • Nicolas Himounet, 2022. "Searching the nature of uncertainty: Macroeconomic and financial risks VS geopolitical and pandemic risks," International Economics, CEPII research center, issue 170, pages 1-31.
    • Handle: RePEc:cii:cepiie:2022-q2-170-1
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    File URL: https://www.sciencedirect.com/science/article/pii/S211070172200018X
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    Cited by:

    1. Nicolas Himounet & Francisco Serranito & Julien Vauday, 2021. "Uncertainty is bad for Business. Really?," Working Papers 2021.03, International Network for Economic Research - INFER.

    More about this item

    Keywords

    Uncertainty; Principal component analysis; Economic activity; SVAR;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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