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The Asymmetric Effects Of Uncertainty On Macroeconomic Activity

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  • Jones, Paul M.
  • Enders, Walter

Abstract

We estimate a number of macroeconomic variables as logistic smooth transition autoregressive (LSTAR) processes with uncertainty as the transition variable. The notion is that the effects of increases in uncertainty should not be symmetrical with the effects of decreases in uncertainty. Nonlinear estimation allows us to answer several interesting questions left unanswered by a linear model. For a number of important macroeconomic variables, we show that (i) a positive shock to uncertainty has a greater effect than a negative shock and (ii) the effect of the uncertainty shock is highly dependent on the state of the economy. Hence, the usual linear estimates for the consequences of uncertainty are underestimated in circumstances such as the recent financial crisis.

Suggested Citation

  • Jones, Paul M. & Enders, Walter, 2016. "The Asymmetric Effects Of Uncertainty On Macroeconomic Activity," Macroeconomic Dynamics, Cambridge University Press, vol. 20(5), pages 1219-1246, July.
  • Handle: RePEc:cup:macdyn:v:20:y:2016:i:05:p:1219-1246_00
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    Cited by:

    1. Choi, Sangyup & Furceri, Davide, 2019. "Uncertainty and cross-border banking flows," Journal of International Money and Finance, Elsevier, vol. 93(C), pages 260-274.
    2. Steffen R. Henzel & Malte Rengel, 2017. "Dimensions Of Macroeconomic Uncertainty: A Common Factor Analysis," Economic Inquiry, Western Economic Association International, vol. 55(2), pages 843-877, April.
    3. Christian Pierdzioch & Rangan Gupta, 2017. "Uncertainty and Forecasts of U.S. Recessions," Working Papers 201732, University of Pretoria, Department of Economics.
    4. repec:eee:intfin:v:55:y:2018:i:c:p:134-150 is not listed on IDEAS
    5. repec:eee:jmacro:v:57:y:2018:i:c:p:317-337 is not listed on IDEAS
    6. Gupta, Rangan & Ma, Jun & Risse, Marian & Wohar, Mark E., 2018. "Common business cycles and volatilities in US states and MSAs: The role of economic uncertainty," Journal of Macroeconomics, Elsevier, vol. 57(C), pages 317-337.
    7. Rangan Gupta & Chi Keung Marco Lau & Mark E. Wohar, 2019. "The impact of US uncertainty on the Euro area in good and bad times: evidence from a quantile structural vector autoregressive model," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 353-368, May.
    8. Magnus Reif, 2018. "Macroeconomic Uncertainty and Forecasting Macroeconomic Aggregates," ifo Working Paper Series 265, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Ademmer, Martin & Beckmann, Joscha & Jannsen, Nils, 2019. "Auswirkungen globaler wirtschaftspolitischer Unsicherheit auf die deutsche Konjunktur," IfW-Box 2019.8, Kiel Institute for the World Economy (IfW).

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