IDEAS home Printed from https://ideas.repec.org/a/aea/aejmac/v18y2026i1p102-48.html

Uncertainty and the Economy: The Evolving Distributions of Aggregate Supply and Demand Shocks

Author

Listed:
  • Geert Bekaert
  • Eric Engstrom
  • Andrey Ermolov

Abstract

We estimate the time-varying distribution of aggregate supply (AS) and aggregate demand (AD) shocks. We distinguish between traditional Gaussian uncertainty and "bad" uncertainty, associated with negative skewness. The Great Moderation is driven by a reduction in the volatility of AS shocks and the Gaussian component of AD shocks. The increased role of "bad" demand uncertainty implies that the conditional skewness of GDP growth and inflation has decreased over time. The correlation between AS/AD shocks and shocks to their conditional volatilities is generally strongly negative. The correlation between inflation and growth shocks has increased due to a decrease in AS volatility.

Suggested Citation

  • Geert Bekaert & Eric Engstrom & Andrey Ermolov, 2026. "Uncertainty and the Economy: The Evolving Distributions of Aggregate Supply and Demand Shocks," American Economic Journal: Macroeconomics, American Economic Association, vol. 18(1), pages 102-148, January.
    • Handle: RePEc:aea:aejmac:v:18:y:2026:i:1:p:102-48
    DOI: 10.1257/mac.20220076
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/mac.20220076
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://doi.org/10.3886/E210101V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/materials/24366
    Download Restriction: no
    File URL: https://libkey.io/10.1257/mac.20220076?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmac:v:18:y:2026:i:1:p:102-48. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.