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Are the effects of Bloom’s uncertainty shocks robust?

  • Choi, Sangyup

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.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 119 (2013)
Issue (Month): 2 ()
Pages: 216-220

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Handle: RePEc:eee:ecolet:v:119:y:2013:i:2:p:216-220
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Bundick, Brent & Basu, Susanto, 2014. "Uncertainty shocks in a model of effective demand," Research Working Paper RWP 14-15, Federal Reserve Bank of Kansas City.
  2. Margaret M. McConnell & Gabriel Perez Quiros, 1998. "Output fluctuations in the United States: what has changed since the early 1980s?," Staff Reports 41, Federal Reserve Bank of New York.
  3. Fabio Fornari & Antonio Mele, 2009. "Financial volatility and economic activity," LSE Research Online Documents on Economics 29309, London School of Economics and Political Science, LSE Library.
  4. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  5. Michelle Alexopoulos & Jon Cohen, 2009. "Uncertain Times, uncertain measures," Working Papers tecipa-352, University of Toronto, Department of Economics.
  6. Thomas Lubik & Frank Schorfheide, 2002. "Testing for Indeterminacy:An Application to U.S. Monetary Policy," Economics Working Paper Archive 480, The Johns Hopkins University,Department of Economics, revised Jun 2003.
  7. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
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