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Uncertainty and long-run economy: the role of R &D and business dynamism

Author

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  • Andrzej Cieślik

    (University of Warsaw)

  • Mehmet Burak Turgut

    (University of Warsaw)

Abstract

In this paper, we study the effects of macroeconomic uncertainty shocks on the US economy in the long-run using an IV-SVAR methodology for the period 1960–2019. Following Piffer and Podstawski (Econ J 128(616):3266–3284, 2018), we use variation in gold prices as an instrument to identify the uncertainty shocks. We find that potential output decreases persistently in response to an uncertainty shock. Furthermore, our study shows that decline in the R &D investments and business dynamism are the two key transmission channels of the uncertainty shocks that generate long lasting effects on the economy.

Suggested Citation

  • Andrzej Cieślik & Mehmet Burak Turgut, 2024. "Uncertainty and long-run economy: the role of R &D and business dynamism," Empirical Economics, Springer, vol. 66(4), pages 1403-1441, April.
    • Handle: RePEc:spr:empeco:v:66:y:2024:i:4:d:10.1007_s00181-023-02501-y
    DOI: 10.1007/s00181-023-02501-y
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    More about this item

    Keywords

    Business dynamism; IV-SVAR; R& D; Uncertainty; Endogenous growth;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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