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Are the effects of Bloom’s uncertainty shocks robust?

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  • Choi, Sangyup

Abstract

This paper shows that “wait-and-see” dynamics of uncertainty shocks in Bloom (2009) are not necessarily robust over time. Bloom (2009) shows that uncertainty shocks, identified by spikes in stock market volatility from 1962 to 2008, trigger immediate falls in output and employment followed by rapid rebounds after the resolution of uncertainty. This paper finds that if one splits the sample into two sub-samples these findings hold only for the period between 1962 and 1982. Stock market volatility shocks failed to produce “wait-and-see” dynamics after 1983.

Suggested Citation

  • Choi, Sangyup, 2013. "Are the effects of Bloom’s uncertainty shocks robust?," Economics Letters, Elsevier, vol. 119(2), pages 216-220.
  • Handle: RePEc:eee:ecolet:v:119:y:2013:i:2:p:216-220
    DOI: 10.1016/j.econlet.2013.02.015
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    References listed on IDEAS

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    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
    2. Susanto Basu & Brent Bundick, 2017. "Uncertainty Shocks in a Model of Effective Demand," Econometrica, Econometric Society, vol. 85, pages 937-958, May.
    3. Fabio Fornari & Antonio Mele, 2013. "Financial Volatility and Economic Activity," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 2, pages 155-198, December.
    4. Thomas A. Lubik & Frank Schorfheide, 2004. "Testing for Indeterminacy: An Application to U.S. Monetary Policy," American Economic Review, American Economic Association, vol. 94(1), pages 190-217, March.
    5. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    6. Jon Cohen & Michelle Alexopoulos, 2009. "Uncertain Times, Uncertain Measures," 2009 Meeting Papers 1211, Society for Economic Dynamics.
    7. Margaret M. McConnell & Gabriel Perez-Quiros, 2000. "Output fluctuations in the United States: what has changed since the early 1980s?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
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    Citations

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    Cited by:

    1. repec:bla:econom:v:84:y:2017:i:336:p:682-711 is not listed on IDEAS
    2. MORIKAWA Masayuki, 2013. "What Type of Policy Uncertainty Matters for Business?," Discussion papers 13076, Research Institute of Economy, Trade and Industry (RIETI).
    3. repec:eee:jmacro:v:53:y:2017:i:c:p:127-144 is not listed on IDEAS
    4. Sungje Byun & Soojin Jo, 2015. "Heterogeneity in the Dynamic Effects of Uncertainty on Investment," Staff Working Papers 15-34, Bank of Canada.
    5. Morikawa, Masayuki, 2016. "Business uncertainty and investment: Evidence from Japanese companies," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 224-236.
    6. Born, Benjamin & Breuer, Sebastian & Elstner, Steffen, 2014. "Uncertainty and the Great Recession," Working Papers 04/2014, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    7. Burkhard Raunig & Johann Scharler & Friedrich Sindermann, 2017. "Do Banks Lend Less in Uncertain Times?," Economica, London School of Economics and Political Science, vol. 84(336), pages 682-711, October.
    8. repec:kap:openec:v:29:y:2018:i:1:d:10.1007_s11079-017-9471-y is not listed on IDEAS
    9. repec:bla:pacecr:v:21:y:2016:i:5:p:527-540 is not listed on IDEAS
    10. Sangyup Choi, 2018. "The Impact of US Financial Uncertainty Shocks on Emerging Market Economies: An International Credit Channel," Open Economies Review, Springer, vol. 29(1), pages 89-118, February.
    11. Choi, Sangyup & Loungani, Prakash, 2015. "Uncertainty and unemployment: The effects of aggregate and sectoral channels," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 344-358.

    More about this item

    Keywords

    Uncertainty shocks; Stock market volatility; Great moderation; ‘‘wait-and-see” dynamics;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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