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Do Plants Freeze Upon Uncertainty Shocks?

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  • Ariel Mecikovsky
  • Matthias Meier

Abstract

What explains the impact of uncertainty shocks on the economy? This paper uses highly disaggregated data on industry-level job flows to investigate the empirical relevance of various transmission channels of uncertainty shocks. The channels we consider are labor adjustment frictions, capital adjustment frictions, nominal ridigities, and financial frictions. For each channel, we derive testable implications regarding the response of job flows to uncertainty shocks. Empirically, uncertainty shocks lead to more job destruction and less job creation in more than 80% of all industries. The effect is significantly stronger in industries that face tighter financial constraints, which supports the financial frictions channel. In contrast, our evidence does not support the other three channels.

Suggested Citation

  • Ariel Mecikovsky & Matthias Meier, 2019. "Do Plants Freeze Upon Uncertainty Shocks?," CRC TR 224 Discussion Paper Series crctr224_2019_075, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2019_075
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    Cited by:

    1. Kovalenko, Tim, 2021. "Uncertainty shocks and employment fluctuations in Germany: The role of establishment size," Discussion Papers 119, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    2. Pierdzioch Christian & Gupta Rangan, 2020. "Uncertainty and Forecasts of U.S. Recessions," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 24(4), pages 1-20, September.
    3. Mario Bossler, 2017. "Employment expectations and uncertainties ahead of the new German minimum wage," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 327-348, September.
    4. Marta Martínez-Matute & Alberto Urtasun, 2022. "Uncertainty and firms’ labour decisions. Evidence from European countries," Journal of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 220-241, December.
    5. Marta Martínez-Matute & Alberto Urtasun, 2018. "Uncertainty, firm heterogeneity and labour adjustments. Evidence from European countries," Working Papers 1821, Banco de España.
    6. Hiroaki Miyamoto, 2016. "Uncertainty shocks and labor market dynamics in Japan," Working Papers SDES-2016-8, Kochi University of Technology, School of Economics and Management, revised Jun 2016.
    7. Rangan Gupta & Chi Keung Marco Lau & Mark E. Wohar, 2019. "The impact of US uncertainty on the Euro area in good and bad times: evidence from a quantile structural vector autoregressive model," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 353-368, May.
    8. Tim Kovalenko, 2021. "Uncertainty shocks and employment fluctuations in Germany: the role of establishment size," Working Papers 212, Bavarian Graduate Program in Economics (BGPE).

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    More about this item

    Keywords

    Uncertainty shocks; Job Flows; Financial Frictions;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics

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