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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
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  1. Michelle Alexopoulos & Jon Cohen, 2009. "Uncertain Times, uncertain measures," Working Papers tecipa-352, University of Toronto, Department of Economics.
  2. Antonio Mele, 2009. "Financial Volatility and Economic Activity," FMG Discussion Papers dp642, Financial Markets Group.
  3. Susanto Basu & Brent Bundick, 2012. "Uncertainty Shocks in a Model of Effective Demand," NBER Working Papers 18420, National Bureau of Economic Research, Inc.
  4. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
  5. Margaret M. McConnell & Gabriel Perez Quiros, 1997. "Output fluctuations in the United States: what has changed since the early 1980s?," Research Paper 9735, Federal Reserve Bank of New York.
  6. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  7. 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.
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