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Political uncertainty in a data-rich environment

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  • Scheffel, Eric Michael

Abstract

We asses the general robustness of previous findings claiming that policy uncertainty exerts non-trivial influences on the US economy. Measuring the dynamic effects from a shock to policy uncertainty within a FAVAR model permits gauging the response of many more variables to policy uncertainty than is possible in a simple VAR model. Our results summarized by impulse responses are all corrected for small sample bias using a bootstrap-after-bootstrap method. Our findings support the view of policy uncertainty exerting a statistically significant influence on the economy, which is however not always as economically significant for a number of variables as found in previous studies.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37318.

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Date of creation: 13 Mar 2012
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Handle: RePEc:pra:mprapa:37318

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Keywords: policy uncertainty; FAVAR; factor analysis; principal component analysis; impulse response analysis; small-sample bias;

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