Asymmetric Effects of Uncertainty over the Business Cycle: A Quantile Structural Vector Autoregressive Approach
AbstractThis paper proposes to relate conditional quantiles of stationary macroeconomic time series to the different phases of the business cycle. Based on this idea, I introduce a Bayesian Quantile Structural Vector Autoregressive framework for the analysis of the effects of uncertainty on the US real economy. For this purpose, I define a novel representation of the multivariate Laplace distribution that allows for the joint treatment of multiple equation regression quantiles. I find significant evidence for asymmetric effects of uncertainty over the US business cycle. The strongest negative effects are revealed during recession periods. During boom phases uncertainty shocks improve the soundness of the economy. Moreover, the phase of the financial sector matters when the real economy is at recession but not if the economy is at boom. When the financial system is in a bad state, an uncertainty shock leads to a deeper recession than in times when the financial system is in a good state.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, University of Konstanz in its series Working Paper Series of the Department of Economics, University of Konstanz with number 2014-02.
Length: 47 pages
Date of creation: 27 Jan 2014
Date of revision:
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-08 (All new papers)
- NEP-ECM-2014-02-08 (Econometrics)
- NEP-MAC-2014-02-08 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
- Steffen Elstner & Eric Sims & Ruediger Bachmann, 2010.
"Uncertainty and Economic Activity: Evidence from Business Survey Data,"
2010 Meeting Papers
614, Society for Economic Dynamics.
- R?diger Bachmann & Steffen Elstner & Eric R. Sims, 2013. "Uncertainty and Economic Activity: Evidence from Business Survey Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 217-49, April.
- Eric R. Sims, 2012. "Uncertainty and Economic Activity: Evidence from Business Survey Data," Working Papers 014, University of Notre Dame, Department of Economics, revised Jun 2012.
- Ruediger Bachmann & Steffen Elstner & Eric R. Sims, 2010. "Uncertainty and Economic Activity: Evidence from Business Survey Data," NBER Working Papers 16143, National Bureau of Economic Research, Inc.
- Yan Carrière–Swallow & Luis Felipe Céspedes, 2011.
"The Impact of Uncertainty Shocks in Emerging Economies,"
Working Papers Central Bank of Chile
646, Central Bank of Chile.
- Carrière-Swallow, Yan & Céspedes, Luis Felipe, 2013. "The impact of uncertainty shocks in emerging economies," Journal of International Economics, Elsevier, vol. 90(2), pages 316-325.
- Christina D. Romer, 1988.
"The Great Crash and the Onset of the Great Depression,"
NBER Working Papers
2639, National Bureau of Economic Research, Inc.
- Romer, Christina D, 1990. "The Great Crash and the Onset of the Great Depression," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 597-624, August.
- Nicholas Bloom, 2009.
"The Impact of Uncertainty Shocks,"
Econometric Society, vol. 77(3), pages 623-685, 05.
- Chen, Cathy W.S. & Gerlach, Richard & Wei, D.C.M., 2009. "Bayesian causal effects in quantiles: Accounting for heteroscedasticity," Computational Statistics & Data Analysis, Elsevier, vol. 53(6), pages 1993-2007, April.
- Genya Kobayashi & Hideo Kozumi, 2012. "Bayesian analysis of quantile regression for censored dynamic panel data," Computational Statistics, Springer, vol. 27(2), pages 359-380, June.
- Thomas Helbling & M. Ayhan Kose & Christopher Otrok & Raju Huidrom, 2010.
"Do Credit Shocks Matter? A Global Perspective,"
IMF Working Papers
10/261, International Monetary Fund.
- Marco Terrones & M. Ayhan Kose & Stijn Claessens, 2011.
"How Do Business and Financial Cycles Interact?,"
IMF Working Papers
11/88, International Monetary Fund.
- Ben S. Bernanke, 1980.
"Irreversibility, Uncertainty, and Cyclical Investment,"
NBER Working Papers
0502, National Bureau of Economic Research, Inc.
- Bernanke, Ben S, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, MIT Press, vol. 98(1), pages 85-106, February.
- Liu Yuan & Bottai Matteo, 2009. "Mixed-Effects Models for Conditional Quantiles with Longitudinal Data," The International Journal of Biostatistics, De Gruyter, vol. 5(1), pages 1-24, November.
- Eickmeier, Sandra & Lemke, Wolfgang & Marcellino, Massimiliano, 2011.
"The changing international transmission of financial shocks: evidence from a classical time-varying FAVAR,"
Discussion Paper Series 1: Economic Studies
2011,05, Deutsche Bundesbank, Research Centre.
- Eickmeier, Sandra & Lemke, Wolfgang & Marcellino, Massimiliano, 2011. "The Changing International Transmission of Financial Shocks: Evidence from a Classical Time-Varying FAVAR," CEPR Discussion Papers 8341, C.E.P.R. Discussion Papers.
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997.
"Monetary policy shocks: what have we learned and to what end?,"
Working Paper Series, Macroeconomic Issues
WP-97-18, Federal Reserve Bank of Chicago.
- Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
- Dries F. Benoit & Dirk Van den Poel, 2012. "Binary quantile regression: a Bayesian approach based on the asymmetric Laplace distribution," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(7), pages 1174-1188, November.
- James H. Stock & Mark W. Watson, 2012. "Disentangling the Channels of the 2007-2009 Recession," NBER Working Papers 18094, National Bureau of Economic Research, Inc.
- Alhamzawi, Rahim & Yu, Keming, 2013. "Conjugate priors and variable selection for Bayesian quantile regression," Computational Statistics & Data Analysis, Elsevier, vol. 64(C), pages 209-219.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- Meeks, Roland, 2012. "Do credit market shocks drive output fluctuations? Evidence from corporate spreads and defaults," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 568-584.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gundula Hadjiani).
If references are entirely missing, you can add them using this form.