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.
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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)
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