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Components of uncertainty

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Abstract

Uncertainty is acknowledged to be a source of economic fluctuations. But, does the type of uncertainty matter for the economy's response to an uncertainty shock? This paper offers a novel identi cation strategy to disentangle different types of uncertainty. It uses machine learning techniques to classify different types of news instead of specifying a set of keywords. It is found that, depending on its source, the effects of uncertainty on macroeconomic variable may differ. I find that both good(expansionary effect) and bad (contractionary effect) types of uncertainty exist.

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  • Vegard Høghaug Larsen, 2017. "Components of uncertainty," Working Paper 2017/5, Norges Bank.
    • Handle: RePEc:bno:worpap:2017_05
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    More about this item

    Keywords

    Newspaper; Topic model; Uncertainty; Business cycles; Machine learning;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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