Measuring the Response of Macroeconomic Uncertainty to Shocks
AbstractRecent research documents the importance of uncertainty in determining macroeconomic outcomes, but little is known about the transmission of uncertainty across such outcomes. This paper examines the response of uncertainty about inflation and output growth to shocks documenting statistically significant asymmetries and spillovers. Uncertainty about inflation is a determinant of output uncertainty, while higher growth volatility tends to raise inflation volatility. Both inflation and growth volatility respond asymmetrically to positive and negative shocks. Negative growth shocks and positive shocks to inflation lead to higher and more persistent uncertainty than shocks of equal magnitude but opposite sign. Keywords: Asymmetry, Inflation, Output Growth, Variance Impulse Response Functions
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 870.
Length: 20 pages
Date of creation: 2003
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Asymmetry; Inflation; Output Growth; Variance Impulse Response Functions;
Other versions of this item:
- Kalvinder Shields & Nilss Olekalns & Ãlan T. Henry & Chris Brooks, 2005. "Measuring the Response of Macroeconomic Uncertainty to Shocks," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 362-370, May.
- E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
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