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Asymmetric Effects of Uncertainty over the Business Cycle: A Quantile Structural Vector Autoregressive Approach

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  • Yves S. Schüler

    ()
    (Department of Economics, University of Konstanz, Germany)

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    Abstract

    This 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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    File URL: http://www.wiwi.uni-konstanz.de/workingpaperseries/WP_02_Schueler_2014.pdf
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    Bibliographic Info

    Paper 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.

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    Length: 47 pages
    Date of creation: 27 Jan 2014
    Date of revision:
    Handle: RePEc:knz:dpteco:1402

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    Related research

    Keywords: Uncertainty; Economic Cycles; Quantile SVAR; Multivariate Laplace;

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    12. 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.
    13. 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.
    14. 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.
    15. 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.
    16. 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.
    17. Christina D. Romer, 1988. "The Great Crash and the Onset of the Great Depression," NBER Working Papers 2639, National Bureau of Economic Research, Inc.
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