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The Macroeconomic Effects of Uncertainty Shocks in India

Author

Listed:
  • Lumengo Bonga-Bonga

    (Faculty of Economic and Financial Sciences, University of Johannesburg)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

  • Charl Jooste

    (Department of Economics, University of Pretoria)

Abstract

The macroeconomic response to uncertainty for India is studied in a structural model that decomposes uncertainty into negative and positive contributions. The results show that uncertainty shocks reduce industrial production, lead to an exchange rate depreciation, lowers prices and increases interest rates. Conversely, a reduction in uncertainty (or an increase in negative uncertainty) increases industrial production, reduces prices, leads to an exchange rate appreciation and slightly increases interest rates. The results, however, reveal that the response to uncertainty is insignificant - this implies that the short run duration and sign could be different.

Suggested Citation

  • Lumengo Bonga-Bonga & Rangan Gupta & Charl Jooste, 2015. "The Macroeconomic Effects of Uncertainty Shocks in India," Working Papers 201516, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201516
    as

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    More about this item

    Keywords

    Uncertainty; Macroeconomic Variables; SVECM; India;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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